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, 2009



| ̈ | 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).     ̈  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,
2009
|Common Stock, par value $5.00 |  | 1,399,981 Shares               









---

PART I  FINANCIAL INFORMATION

Item 1. Financial Statements



FIRST COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars In Thousands, Except
Share Data)



|                                                                     |  |                   |         |   |                  |   |         |  
|-------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                     |  | September 30,2009 |         |   | December 31,2008 |  
|ASSETS                                                               |  |                   |         |   |                  |   |         |  
|Cash & due from banks                                                |  | $                 | 6,373   |   |                  | $ | 6,278   |  
|Interest bearing deposits with banks                                 |  |                   | 3,551   |   |                  |   | 586     |  
|Federal funds sold                                                   |  |                   | 5,359   |   |                  |   |        |  
|                                                                     |  |                   |         |   |                  |   |         |  
|Cash & cash equivalents                                              |  |                   | 15,283  |   |                  |   | 6,864   |  
|Time certificates of deposit                                         |  |                   | 396     |   |                  |   | 396     |  
|Securities available for sale                                        |  |                   | 77,799  |   |                  |   | 66,376  |  
|Securities held to maturity, fair value 2009 $ 30,471; 2008 $ 23,248 |  |                   | 30,281  |   |                  |   | 24,127  |  
|Loansnet of allowance for loan losses 2009 $ 2,341; 2008 $ 1,633    |  |                   | 211,440 |   |                  |   | 212,377 |  
|Premises & equipment, net                                            |  |                   | 6,280   |   |                  |   | 6,397   |  
|Restricted investment in bank stocks                                 |  |                   | 2,661   |   |                  |   | 2,661   |  
|Investment in life insurance                                         |  |                   | 5,066   |   |                  |   | 4,933   |  
|Other assets                                                         |  |                   | 3,541   |   |                  |   | 2,583   |  
|                                                                     |  |                   |         |   |                  |   |         |  
|                                                                     |  |                  
|TOTAL ASSETS                                                         |  | $                 | 352,747 |   |                  | $ | 326,714 |  
|                                                                     |  |                   |         |   |                  |   |         |  
|                                                                     |  |                  
|LIABILITIES                                                          |  |                   |         |   |                  |   |         |  
|Deposits:                                                            |  |                   |         |   |                  |   |         |  
|Non-interest bearing                                                 |  | $                 | 27,342  |   |                  | $ | 29,192  |  
|Interest bearing                                                     |  |                   | 266,144 |   |                  |   | 233,414 |  
|                                                                     |  |                   |         |   |                  |   |         |  
|Total deposits                                                       |  |                   | 293,486 |   |                  |   | 262,606 |  
|Short-term borrowings                                                |  |                   | 4,214   |   |                  |   | 10,613  |  
|Long-term borrowings                                                 |  |                   | 22,000  |   |                  |   | 22,000  |  
|Junior subordinated debt                                             |  |                   | 5,155   |   |                  |   | 5,155   |  
|Other liabilities                                                    |  |                   | 2,795   |   |                  |   | 2,927   |  
|                                                                     |  |                   |         |   |                  |   |         |  
|                                                                     |  |                  
|TOTAL LIABILITIES                                                    |  |                   | 327,650 |   |                  |   | 303,301 |  
|                                                                     |  |                   |         |   |                  |   |         |  
|                                                                     |  |                  
|SHAREHOLDERS EQUITY                                                 |  |                   |         |   |                  |   |         |  
|Preferred stock, without par value;                                  |  |                   |         |   |                  |   |         |  
|10,000,000 shares authorized and unissued                            |  |                   |        |   |                  |   |        |  
|Common stock, $ 5.00 par value;                                      |  |                   |         |   |                  |   |         |  
|Shares authorized10,000,000                                         |  |                   |         |   |                  |   |         |  
|Shares issued20091,403,632; 20081,401,918                         |  |                   |         |   |                  |   |         |  
|Shares outstanding20091,399,981; 20081,399,868                    |  |                   | 7,018   |   |                  |   | 7,010   |  
|Capital in excess of par value                                       |  |                   | 336     |   |                  |   | 293     |  
|Retained earnings                                                    |  |                   | 16,680  |   |                  |   | 15,406  |  
|Treasury stock, at cost 2009-3,651 shares; 2008-2,050 shares         |  |                   | (110    | ) |                  |   | (62     | )
|Accumulated other comprehensive income                               |  |                   | 1,173   |   |                  |   | 766     |  
|                                                                     |  |                   |         |   |                  |   |         |  
|TOTAL SHAREHOLDERS EQUITY                                           |  |                   | 25,097  |   |                  |   | 23,413  |  
|                                                                     |  |                   |         |   |                  |   |         |  
|                                                                     |  |                  
|TOTAL LIABILITIES & SHAREHOLDERS EQUITY                             |  | $                 | 352,747 |   |                  | $ | 326,714 |  
|                                                                     |  |                   |         |   |                  |   |         |  

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,
|                                                    |  | 2009                            |       | 2008                           |   | 2009  |  | 2008
|INTEREST INCOME                                     |  |                                 |       |                                |   |       |  |      |        |  |   |       
|Interest & fees on loans                            |  | $                               | 3,500 |                                | $ | 3,581 |  | $    | 10,655 |  | $ | 10,373
|Interest on taxable securities                      |  |                                 | 793   |                                |   | 880   |  |      | 2,349  |  |   | 2,575 
|Interest on tax-exempt securities                   |  |                                 | 306   |                                |   | 217   |  |      | 835    |  |   | 630   
|Other interest & dividends                          |  |                                 | 15    |                                |   | 33    |  |      | 40     |  |   | 158   
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|TOTAL INTEREST INCOME                               |  |                                 | 4,614 |                                |   | 4,711 |  |      | 13,879 |  |   | 13,736
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|                                                    |  |                                 |       |                               
|INTEREST EXPENSE                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|Interest on deposits                                |  |                                 | 1,881 |                                |   | 1,910 |  |      | 5,635  |  |   | 5,989 
|Interest on short term borrowings                   |  |                                 | 12    |                                |   | 41    |  |      | 38     |  |   | 135   
|Interest on long term borrowings                    |  |                                 | 309   |                                |   | 337   |  |      | 934    |  |   | 1,021 
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|TOTAL INTEREST EXPENSE                              |  |                                 | 2,202 |                                |   | 2,288 |  |      | 6,607  |  |   | 7,145 
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|                                                    |  |                                 |       |                               
|NET INTEREST INCOME                                 |  |                                 | 2,412 |                                |   | 2,423 |  |      | 7,272  |  |   | 6,591 
|Provision for loan losses                           |  |                                 | 535   |                                |   | 93    |  |      | 737    |  |   | 168   
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |  |                                 | 1,877 |                                |   | 2,330 |  |      | 6,535  |  |   | 6,423 
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|                                                    |  |                                 |       |                               
|NON-INTEREST INCOME                                 |  |                                 |       |                                |   |       |  |      |        |  |   |       
|Service charges on deposits                         |  |                                 | 214   |                                |   | 227   |  |      | 604    |  |   | 640   
|Fiduciary activities                                |  |                                 | 163   |                                |   | 99    |  |      | 422    |  |   | 299   
|Earnings on investment in life insurance            |  |                                 | 61    |                                |   | 52    |  |      | 168    |  |   | 155   
|ATM card fees                                       |  |                                 | 148   |                                |   | 145   |  |      | 426    |  |   | 411   
|Securities gains                                    |  |                                 | 185   |                                |   |      |  |      | 459    |  |   |      
|Other income                                        |  |                                 | 81    |                                |   | 60    |  |      | 264    |  |   | 179   
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|TOTAL OTHER INCOME                                  |  |                                 | 852   |                                |   | 583   |  |      | 2,343  |  |   | 1,684 
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|                                                    |  |                                 |       |                               
|NON-INTEREST EXPENSES                               |  |                                 |       |                                |   |       |  |      |        |  |   |       
|Employee compensation & benefits                    |  |                                 | 1,058 |                                |   | 1,037 |  |      | 3,219  |  |   | 2,942 
|Net occupancy & equipment                           |  |                                 | 280   |                                |   | 289   |  |      | 874    |  |   | 867   
|ATM expense                                         |  |                                 | 99    |                                |   | 94    |  |      | 290    |  |   | 271   
|Professional fees                                   |  |                                 | 95    |                                |   | 51    |  |      | 323    |  |   | 233   
|Director & advisory boards compensation             |  |                                 | 83    |                                |   | 94    |  |      | 232    |  |   | 268   
|Supplies & postage                                  |  |                                 | 65    |                                |   | 68    |  |      | 222    |  |   | 207   
|FDIC and OCC assessments                            |  |                                 | 181   |                                |   | 67    |  |      | 572    |  |   | 143   
|Other non-interest expenses                         |  |                                 | 278   |                                |   | 274   |  |      | 835    |  |   | 830   
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|TOTAL NON-INTEREST EXPENSES                         |  |                                 | 2,139 |                                |   | 1,974 |  |      | 6,567  |  |   | 5,761 
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|                                                    |  |                                 |       |                               
|Income before income taxes                          |  |                                 | 590   |                                |   | 939   |  |      | 2,311  |  |   | 2,346 
|Income tax expense                                  |  |                                 | 71    |                                |   | 220   |  |      | 436    |  |   | 512   
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|NET INCOME                                          |  | $                               | 519   |                                | $ | 719   |  | $    | 1,875  |  | $ | 1,834 
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|                                                    |  |                                 |       |                               
|Basic earnings per share                            |  | $                               | 0.37  |                                | $ | 0.51  |  | $    | 1.34   |  | $ | 1.31  
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|Dividends per share                                 |  | $                               | 0.150 |                                | $ | 0.135 |  | $    | 0.430  |  | $ | 0.385 
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       

See accompanying notes.



3



---

PART I  FINANCIAL INFORMATION, CONTINUED



Item 1. Financial Statements, continued





FIRST COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

For the Nine Months Ended September 30, 2009 and 2008

(Unaudited)

(Dollars In Thousands, Except Per Share Data)



|                                                                                                                    |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|------------------------------------------------------------------------------------------------------------------- |  | ----------- | ----- | --------------------------- | - | ---------------- |  | - | ------------- | - |  | ----------------------------------- | ---- | ----- |  | - | ----- |  | - | ------ | -
|                                                                                                                    |  | CommonStock |       | CapitalIn ExcessofPar Value |   | RetainedEarnings |  |   | TreasuryStock |   |  | AccumulatedOtherComprehensiveIncome |      | Total | 
|BalanceJanuary 1, 2008                                                                                             |  | $           | 7,000 |                             | $ | 245              |  | $ | 13,993        |   |  | $                                   |     |       |  | $ | 295   |  | $ | 21,533 |  
|                                                                                                                    |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|                                                                                                                    |  |             |       |                             |   |                 
|Cumulative effect adjustment upon change in accounting principle                                                    |  |             |       |                             |   |                  |  |   | (195          | ) |  |                                     |      |       |  |   |       |  |   | (195   | )
|                                                                                                                    |  |             |       |                             |   |                 
|Comprehensive income:                                                                                               |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|Net income                                                                                                          |  |             |       |                             |   |                  |  |   | 1,834         |   |  |                                     |      |       |  |   |       |  |   | 1,834  |  
|Change in net unrealized losses on securities available for sale, net of deferred income taxes                      |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   | 61    |  |   | 61     |  
|                                                                                                                    |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|Total comprehensive income                                                                                          |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   | 1,895  |  
|                                                                                                                    |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|                                                                                                                    |  |             |       |                             |   |                 
|Issuance of stock in connection with Dividend reinvestment plan1,348 shares                                        |  |             | 7     |                             |   | 34               |  |   |               |   |  |                                     |      |       |  |   |       |  |   | 41     |  
|Treasury stock acquired1,000 shares                                                                                |  |             |       |                             |   |                  |  |   |               |   |  |                                     | (31  | )     |  |   |       |  |   | (31    | )
|Cash dividends, $0.385 per share                                                                                    |  |             |       |                             |   |                  |  |   | (539          | ) |  |                                     |      |       |  |   |       |  |   | (539   | )
|                                                                                                                    |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|                                                                                                                    |  |             |       |                             |   |                 
|Balance, September 30, 2008                                                                                         |  | $           | 7,007 |                             | $ | 279              |  | $ | 15,093        |   |  | $                                   | (31  | )     |  | $ | 356   |  | $ | 22,704 |  
|                                                                                                                    |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|                                                                                                                    |  |             |       |                             |   |                 
|BalanceJanuary 1, 2009                                                                                             |  | $           | 7,010 |                             | $ | 293              |  | $ | 15,406        |   |  | $                                   | (62  | )     |  | $ | 766   |  | $ | 23,413 |  
|                                                                                                                    |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|                                                                                                                    |  |             |       |                             |   |                 
|Comprehensive income:                                                                                               |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|Net income                                                                                                          |  |             |       |                             |   |                  |  |   | 1,875         |   |  |                                     |      |       |  |   |       |  |   | 1,875  |  
|Change in net unrealized gains on securities available for sale, net of deferred income taxes and
reclassifications |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   | 407   |  |   | 407    |  
|                                                                                                                    |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|Total comprehensive income                                                                                          |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   | 2,282  |  
|                                                                                                                    |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|                                                                                                                    |  |             |       |                             |   |                 
|Issuance of stock in connection with dividend reinvestment plan1,714 shares                                        |  |             | 8     |                             |   | 43               |  |   |               |   |  |                                     |      |       |  |   |       |  |   | 51     |  
|Treasury stock acquired1,601 shares                                                                                |  |             |       |                             |   |                  |  |   |               |   |  |                                     | (48  | )     |  |   |       |  |   | (48    | )
|Cash dividends, $0.43 per share                                                                                     |  |             |       |                             |   |                  |  |   | (601          | ) |  |                                     |      |       |  |   |       |  |   | (601   | )
|                                                                                                                    |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|                                                                                                                    |  |             |       |                             |   |                 
|Balance, September 30, 2009                                                                                         |  | $           | 7,018 |                             | $ | 336              |  | $ | 16,680        |   |  | $                                   | (110 | )     |  | $ | 1,173 |  | $ | 25,097 |  
|                                                                                                                    |  |             |       |                             |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  

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, |        
|                                                                                  |  | 2009                           |         |   | 2008 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |                                |         |   |      |   |         |  
|Net income                                                                        |  | $                              | 1,875   |   |      | $ | 1,834   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                |         |   |      |   |         |  
|Provision for loan losses                                                         |  |                                | 737     |   |      |   | 168     |  
|Depreciation and amortization                                                     |  |                                | 400     |   |      |   | 409     |  
|Net accretion of securities premium                                               |  |                                | (161    | ) |      |   | (203    | )
|Net realized gains on sales of securities                                         |  |                                | (459    | ) |      |   |        |  
|Earnings on life insurance                                                        |  |                                | (168    | ) |      |   | (155    | )
|Increase in other assets                                                          |  |                                | (882    | ) |      |   | (811    | )
|Increase (decrease) in other liabilities                                          |  |                                | (132    | ) |      |   | 284     |  
|                                                                                  |  |                                |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                                | 1,210   |   |      |   | 1,526   |  
|                                                                                  |  |                                |         |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |                                |         |   |      |   |         |  
|Securities held to maturity:                                                      |  |                                |         |   |      |   |         |  
|Maturities, calls and principal repayments                                        |  |                                | 3,185   |   |      |   | 2,371   |  
|Purchases                                                                         |  |                                | (9,051  | ) |      |   | (3,864  | )
|Securities available for sale:                                                    |  |                                |         |   |      |   |         |  
|Maturities, calls and principal repayments                                        |  |                                | 14,793  |   |      |   | 14,809  |  
|Purchases                                                                         |  |                                | (34,256 | ) |      |   | (20,586 | )
|Proceeds from sales                                                               |  |                                | 8,981   |   |      |   |        |  
|Net increase in loans receivable                                                  |  |                                | (43     | ) |      |   | (19,558 | )
|Net increase in restricted investment in bank stocks                              |  |                                |        |   |      |   | (636    | )
|Purchases of premises and equipment                                               |  |                                | (283    | ) |      |   | (212    | )
|Net maturities of interest bearing time deposits                                  |  |                                |        |   |      |   |        |  
|                                                                                  |  |                                |         |   |      |   |         |  
|Net cash used in investing activities                                             |  |                                | (16,674 | ) |      |   | (27,676 | )
|                                                                                  |  |                                |         |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |                                |         |   |      |   |         |  
|Net increase (decrease) in non-interest bearing demand and savings deposits       |  |                                | (1,850  | ) |      |   | 2,334   |  
|Net increase in time deposits                                                     |  |                                | 32,730  |   |      |   | 12,906  |  
|Net increase (decrease) in short-term borrowings                                  |  |                                | (6,399  | ) |      |   | 5,545   |  
|Proceeds from long-term borrowings                                                |  |                                |        |   |      |   | 5,000   |  
|Repayment of long-term borrowings                                                 |  |                                |        |   |      |   | (1,000  | )
|Proceeds from issuance of common stock                                            |  |                                | 51      |   |      |   | 41      |  
|Acquisition of treasury stock                                                     |  |                                | (48     | ) |      |   | (31     | )
|Dividends paid                                                                    |  |                                | (601    | ) |      |   | (539    | )
|                                                                                  |  |                                |         |   |      |   |         |  
|Net cash provided by financing activities                                         |  |                                | 23,883  |   |      |   | 24,256  |  
|                                                                                  |  |                                |         |   |      |   |         |  
|Net increase (decrease) in cash and cash equivalents                              |  |                                | 8,419   |   |      |   | (1,894  | )
|Cash and cash equivalents:                                                        |  |                                |         |   |      |   |         |  
|Beginning of year                                                                 |  |                                | 6,864   |   |      |   | 10,082  |  
|                                                                                  |  |                                |         |   |      |   |         |  
|End of period                                                                     |  | $                              | 15,283  |   |      | $ | 8,188   |  
|                                                                                  |  |                                |         |   |      |   |         |  
|SUPPLEMENTAL DISCLOSURES:                                                         |  |                                |         |   |      |   |         |  
|Cash payments for interest                                                        |  | $                              | 6,709   |   |      | $ | 7,176   |  
|                                                                                  |  |                                |         |   |      |   |         |  
|Cash payments for income taxes                                                    |  | $                              | 759     |   |      | $ | 582     |  
|                                                                                  |  |                                |         |   |      |   |         |  
|NON CASH INVESTING:                                                               |  |                                |         |   |      |   |         |  
|Transfer of loans to foreclosed real estate                                       |  | $                              | 243     |   |      | $ |        |  
|                                                                                  |  |                                |         |   |      |   |         |  

See accompanying notes.



5



---

PART I  FINANCIAL INFORMATION, CONTINUED



Item 1. Financial Statements, continued



FIRST COMMUNITY FINANCIAL
CORPORATION

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

September 30, 2009

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. The 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 accounting principles generally accepted in the United States of America 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
three and/or nine months ended September 30, 2009, are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

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, 2008,
included in the Corporations Form 10-K filed with the Securities and Exchange Commission on February 28, 2009.

The Corporation has
evaluated events and transactions occurring subsequent to the balance sheet date of September 30, 2009, for items that should potentially be recognized or disclosed in these financial statements. The evaluation was conducted through
November 13, 2009, the date these financial statements were issued.



6



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



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.

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 MonthsEnded      |      |   | Nine MonthsEnded |  
|                                                   |  | September 30,          |      |   | September 30,    |  
|                                                   |  | 2009                   |      |   | 2008             |   |     | 2009 |  |   | 2008  |  
|                                                   |  | (Dollars in Thousands) |     
|                                                   |  |                        |      |  
|Unrealized holding gains arising during the period |  | $                      | 389  |   |                  | $ | 105 |      |  | $ | 1,068 |   |  | $ | 91  |  
|Reclassification of gains realized in net income   |  |                        | (185 | ) |                  |   |    |      |  |   | (459  | ) |  |   |    |  
|                                                   |  |                        |      |   |                  |   |     |      |  |   |       |   |  |   |     |  
|                                                   |  |                        | 204  |   |                  |   | 105 |      |  |   | 609   |   |  |   | 91  |  
|Income tax effect                                  |  |                        | (64  | ) |                  |   | (36 | )    |  |   | (202  | ) |  |   | (30 | )
|                                                   |  |                        |      |   |                  |   |     |      |  |   |       |   |  |   |     |  
|Change in accumulated other comprehensive income   |  | $                      | 140  |   |                  | $ | 69  |      |  | $ | 407   |   |  | $ | 61  |  
|                                                   |  |                        |      |   |                  |   |     |      |  |   |       |   |  |   |     |  

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 was 1,399,257 for the nine months ended September 30, 2009 and 1,399,408 for the three months ended September 30, 2009. The weighted average number of shares outstanding was 1,399,912 for the nine months ended
September 30, 2008 and 1,399,718 for the three months ended September 30, 2008.

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



7



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



Corporation had $206,000 of standby letters of credit as of September 30, 2009. 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, 2009 for guarantees under standby letters of credit issued is
not material.

Note F  Securities

Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. Securities available for sale are those
securities that the Corporation intends to hold for an indefinite period of time, but not necessarily to maturity. Any decision to sell an available for sale security would be based on various factors. These securities are stated at fair value.
Unrealized gains (losses) are reported as changes in other comprehensive income, a component of shareholders equity, net of the related deferred tax effect. Premiums and discounts are recognized as interest income over the estimated lives of
the securities, using the interest method. Securities held to maturity are those securities that the Corporation has the intent and ability to hold to maturity. These securities are stated at cost adjusted for amortization of premiums and accretion
of discounts, which is recognized as interest income over their estimated lives, using the interest method. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or
market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) for
equity securities, 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.

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 320, Investments  Debt and Equity Securities, clarifies the interaction of the factors that should be
considered when determining whether a debt security is other-than-temporarily impaired. For debt securities, management assesses whether (a) it has the intent to sell the security and (b) it is more likely than not that it will be required
to sell the security prior to its anticipated recovery. These steps are done before assessing whether the entity will recover the cost basis of the investment. Previously, this assessment required management to assert it has both the intent and the
ability to hold a security for a period of time sufficient to allow for an anticipated recovery in fair value to avoid recognizing an other-than-temporary impairment. This change does not affect the need to forecast recovery of the value of the
security through either cash flows or market price.



8



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



In instances when a determination is made that an other-than-temporary impairment exists but the
investor does not intend to sell the debt security and it is not more likely than not that it will be required to sell the debt security prior to its anticipated recovery, FASB Topic 320 changes the presentation and amount of the
other-than-temporary impairment recognized in the income statement. The other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected
from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings.
The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income. FASB ASC Topic 320 was effective for the Corporation for interim and annual reporting periods June 30, 2009 and
after. The adoption of this FASB ASC Topic did not impact the Corporations financial condition or results of operations.

Amortized cost
and fair value at September 30, 2009 and December 31, 2008 were as follows:



|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|------------------------------ |  | -------------- | ------ | -------------------- | - | --------------------- |  | - | --------- | - |  | - | ------
|                               |  | AmortizedCost  |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | FairValue
|                               |  | (In Thousands)
|                               |  |                |        |                     
|SECURITIES AVAILABLE FOR SALE: |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|September 30, 2009:            |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|U.S. agency securities         |  | $              | 11,492 |                      | $ | 72                    |  | $ | (7        | ) |  | $ | 11,557
|Mortgage-backed securities     |  |                | 63,842 |                      |   | 1,531                 |  |   | (89       | ) |  |   | 65,284
|Equity securities              |  |                | 661    |                      |   | 297                   |  |   |          |   |  |   | 958   
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  |                |        |                     
|                               |  | $              | 75,995 |                      | $ | 1,900                 |  | $ | (96       | ) |  | $ | 77,799
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  |                |        |                     
|December 31, 2008:             |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|U.S. agency securities         |  | $              | 6,590  |                      | $ | 134                   |  | $ |          |   |  | $ | 6,724 
|Mortgage-backed securities     |  |                | 58,084 |                      |   | 883                   |  |   | (205      | ) |  |   | 58,762
|Equity securities              |  |                | 507    |                      |   | 387                   |  |   | (4        | ) |  |   | 890   
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  |                |        |                     
|                               |  | $              | 65,181 |                      | $ | 1,404                 |  | $ | (209      | ) |  | $ | 66,376
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       



9



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|------------------------------ |  | -------------- | ------ | -------------------- | - | --------------------- |  | - | --------- | - |  | - | ------
|                               |  | AmortizedCost  |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | FairValue
|                               |  | (In Thousands)
|                               |  |                |        |                     
|SECURITIES HELD TO MATURITY:   |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|September 30, 2009:            |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|U.S. agency securities         |  | $              | 250    |                      | $ | 13                    |  | $ |          |   |  | $ | 263   
|State and municipal securities |  |                | 30,031 |                      |   | 768                   |  |   | (591      | ) |  |   | 30,208
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  |                |        |                     
|                               |  | $              | 30,281 |                      | $ | 781                   |  | $ | (591      | ) |  | $ | 30,471
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  |                |        |                     
|December 31, 2008:             |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|U.S. agency securities         |  | $              | 250    |                      | $ | 17                    |  | $ |          |   |  | $ | 267   
|State and municipal securities |  |                | 23,877 |                      |   | 186                   |  |   | (1,082    | ) |  |   | 22,981
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  |                |        |                     
|                               |  | $              | 24,127 |                      | $ | 203                   |  | $ | (1,082    | ) |  | $ | 23,248
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       

The following table shows the Corporations investments gross unrealized losses and fair
value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2009 and December 31, 2008:



|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|------------------------------ |  | ------------------- | ------ | ----------------- | - | --------- |  | ---------------- | ----- | --------- | - | ---------------- |  | - | ------ |  | - | ---
|                               |  | Less than 12 Months |        | 12 Months or More |   | Total    
|                               |  | FairValue           |        | UnrealizedLosses  |   | FairValue |  | UnrealizedLosses |       | FairValue |   | UnrealizedLosses
|                               |  | (In Thousands)     
|September 30, 2009             |  |                     |       
|                               |  |                     |        |                   |   |          
|SECURITIES AVAILABLE FOR SALE: |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|U. S agency securities         |  | $                   | 2,823  |                   | $ | 7         |  | $                |      |           | $ |                 |  | $ | 2,823  |  | $ | 7  
|Mortgage-backed securities     |  |                     | 8,243  |                   |   | 75        |  |                  | 1,229 |           |   | 14               |  |   | 9,472  |  |   | 89 
|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|                               |  |                     |        |                   |   |          
|                               |  |                     | 11,066 |                   |   | 82        |  |                  | 1,229 |           |   | 14               |  |   | 12,295 |  |   | 96 
|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|SECURITIES HELD TO MATURITY:   |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|State and municipal securities |  |                     | 1,045  |                   |   | 19        |  |                  | 4,783 |           |   | 572              |  |   | 5,828  |  |   | 591
|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|                               |  |                     |        |                   |   |          
|Total                          |  | $                   | 12,111 |                   | $ | 101       |  | $                | 6,012 |           | $ | 586              |  | $ | 18,123 |  | $ | 687
|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    



10



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |      
|------------------------------ |  | ------------------- | ------ | ----------------- | - | --------- |  | ---------------- | ----- | --------- | - | ---------------- |  | - | ------ |  | - | -----
|                               |  | Less than 12 Months |        | 12 Months or More |   | Total    
|                               |  | FairValue           |        | UnrealizedLosses  |   | FairValue |  | UnrealizedLosses |       | FairValue |   | UnrealizedLosses
|                               |  | (In Thousands)     
|December 31, 2008              |  |                     |       
|                               |  |                     |        |                   |   |          
|SECURITIES AVAILABLE FOR SALE: |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |      
|Mortgage-backed securities     |  | $                   | 10,812 |                   | $ | 84        |  | $                | 5,207 |           | $ | 121              |  | $ | 16,019 |  | $ | 205  
|Equity securities              |  |                     | 16     |                   |   | 4         |  |                  |      |           |   |                 |  |   | 16     |  |   | 4    
|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |      
|                               |  |                     |        |                   |   |          
|                               |  |                     | 10,828 |                   |   | 88        |  |                  | 5,207 |           |   | 121              |  |   | 16,035 |  |   | 209  
|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |      
|                               |  |                     |        |                   |   |          
|SECURITIES HELD TO MATURITY:   |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |      
|State and municipal securities |  |                     | 11,408 |                   |   | 818       |  |                  | 1,025 |           |   | 264              |  |   | 12,433 |  |   | 1,082
|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |      
|                               |  |                     |        |                   |   |          
|Total                          |  | $                   | 22,236 |                   | $ | 906       |  | $                | 6,232 |           | $ | 385              |  | $ | 28,468 |  | $ | 1,291
|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |      

At September 30, 2009, two U. S. agency securities have unrealized losses. The aggregate
depreciation from the Corporations amortized cost basis on these securities is 0.2%. In managements opinion, these unrealized losses relate to changes in interest rates.

At September 30, 2009, twenty-seven mortgage-backed securities have unrealized losses. The aggregate depreciation from the Corporations amortized cost basis on these securities is 0.9%. In
managements opinion, these unrealized losses relate to changes in interest rates. The Corporations mortgage backed security portfolio consists of only government sponsored agencies, and contains no private label securities.

At September 30, 2009, twenty-eight state and municipal securities have unrealized losses with aggregate depreciation of 9.2% from the
Corporations amortized cost basis. In managements opinion, these unrealized losses relate primarily to changes in interest rates. In analyzing the issuers financial condition, management considers the issuers bond rating as
well as the financial performance of the respective municipality.

During 2009, one equity security, a regional bank holding company, was
deemed to be other-than-temporarily impaired and a $15,000 charge was recorded in the second quarter of 2009. This equity security had depreciated in fair value 70% during the last year, its dividend has been significantly reduced, and a near term
recovery of value is not expected.



11



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



Gross realized gains and losses for the nine months ending September 30, 2009 were as follows:



|                           |  |                    |     |                     |   |     |                   |  |   |     |  
|-------------------------- |  | ------------------ | --- | ------------------- | - | --- | ----------------- |  | - | --- | -
|                           |  | GrossRealizedGains |     | GrossRealizedLosses |   |     | Net Gains(Losses) | 
|September 30, 2009:        |  |                    |     |                     |   |     |                   |  |   |     |  
|U.S. agency securities     |  | $                  | 134 |                     | $ |    |                   |  | $ | 134 |  
|Mortgage-backed securities |  |                    | 340 |                     |   |    |                   |  |   | 340 |  
|Equity securities          |  |                    |    |                     |   | (15 | )                 |  |   | (15 | )
|                           |  |                    |     |                     |   |     |                   |  |   |     |  
|                           |  |                    |    
|                           |  | $                  | 474 |                     | $ | (15 | )                 |  | $ | 459 |  
|                           |  |                    |     |                     |   |     |                   |  |   |     |  

Amortized cost and fair value at September 30, 2009 by contractual maturity are shown below.
Municipal securities with prerefunded issues are included in the category in which payment is expected to occur. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay with or without
penalties.



|                              |  |                    |        |                  |   |               |  |           |        |  |   |       
|----------------------------- |  | ------------------ | ------ | ---------------- | - | ------------- |  | --------- | ------ |  | - | ------
|                              |  | Available for Sale |        | Held to Maturity
|                              |  | AmortizedCost      |        | FairValue        |   | AmortizedCost |  | FairValue
|                              |  | (In Thousands)    
|1 year or less                |  | $                  | 5,088  |                  | $ | 5,107         |  | $         | 1,355  |  | $ | 1,369 
|Over 1 year through 5 years   |  |                    | 5,510  |                  |   | 5,553         |  |           | 3,836  |  |   | 3,878 
|Over 5 years through 10 years |  |                    | 894    |                  |   | 897           |  |           | 13,169 |  |   | 13,514
|Over 10 years                 |  |                    |       |                  |   |              |  |           | 11,921 |  |   | 11,710
|Mortgage-backed securities    |  |                    | 63,842 |                  |   | 65,284        |  |           |       |  |   |      
|Equity securities             |  |                    | 661    |                  |   | 958           |  |           |       |  |   |      
|                              |  |                    |        |                  |   |               |  |           |        |  |   |       
|                              |  |                    |        |                 
|                              |  | $                  | 75,995 |                  | $ | 77,799        |  | $         | 30,281 |  | $ | 30,471
|                              |  |                    |        |                  |   |               |  |           |        |  |   |       

Note G: Fair Value of Financial Instruments

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



12



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



ASC Topic 820, Fair Value Measurements and Disclosure, which defines fair value, establishes a
framework for measuring fair value under GAAP, expands disclosures about fair value measurements, and applies to other accounting pronouncements that require or permit fair value measurements. The Bank adopted Fair Value Measurements
effective for its fiscal year beginning January 1, 2008.

Fair value measurement and disclosure guidance, defines fair value as the price
that would be received to sell the asset or transfer the liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. Additional
guidance is provided on determining when the volume and level of activity for the asset or liability has significantly decreased. The Topic also includes guidance on identifying circumstances when a transaction may not be considered orderly.

Fair value measurement and disclosure provides a list of factors that a reporting entity should evaluate to determine whether there has been
a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. When the reporting entity concludes there has been a significant decrease in the volume and level
of activity for the asset or liability, further analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with fair value measurement and disclosure
guidance.

ASC Topic 820 clarifies that when there has been a significant decrease in the volume and level of activity for the asset or
liability, some transactions may not be orderly. In those situations, the entity must evaluate the weight of the evidence to determine whether the transaction is orderly. This Topic provides a list of circumstances that may indicate that a
transaction is not orderly. A transaction price that is not associated with an orderly transaction is given little, if any, weight when estimating fair value.

Fair value measurement and disclosure establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. 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 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.



13



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



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s 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.

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, 2009 and December 31, 2008 are as follows (in thousands):



|                              |  |                   |        |                                                            |   |                                           |  |                                        |        |  |   |    
|----------------------------- |  | ----------------- | ------ | ---------------------------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | ------ |  | - | ---
|Description                   |  | September 30,2009 |        | (Level 1)Quoted Prices inActive Marketsfor IdenticalAssets |   | (Level 2)SignificantOtherObservableInputs |  | (Level 3)SignificantUnobservableInputs
|                              |  |                   |        |                                                           
|Securities available for sale |  | $                 | 77,799 |                                                            | $ | 450                                       |  | $                                      | 76,841 |  | $ | 508



|                              |  |                  |        |                                                            |   |                                           |  |                                        |        |  |   |    
|----------------------------- |  | ---------------- | ------ | ---------------------------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | ------ |  | - | ---
|Description                   |  | December 31,2008 |        | (Level 1)Quoted Prices inActive Marketsfor IdenticalAssets |   | (Level 2)SignificantOtherObservableInputs |  | (Level 3)SignificantUnobservableInputs
|                              |  |                  |        |                                                           
|Securities available for sale |  | $                | 66,376 |                                                            | $ | 465                                       |  | $                                      | 65,486 |  | $ | 425

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) for the periods ending September 30, 2009.



|                                                            |  |                                      |     |   |                                     |   |     |  
|----------------------------------------------------------- |  | ------------------------------------ | --- | - | ----------------------------------- | - | --- | -
|                                                            |  | Three Months EndedSeptember 30, 2009 |     |   | Nine Months EndedSeptember 30, 2009 |  
|Fair Value, beginning of period                             |  | $                                    | 595 |   |                                     | $ | 425 |  
|Total gains (losses) included in earnings                   |  |                                      | 0   |   |                                     |   | 0   |  
|Total gains (losses) included in other comprehensive income |  |                                      | (87 | ) |                                     |   | (87 | )
|Purchases, issuances, and settlements                       |  |                                      | 0   |   |                                     |   | 170 |  
|Transfers in and/or out of Level 3                          |  |                                      | 0   |   |                                     |   | 0   |  
|                                                            |  |                                      |     |   |                                     |   |     |  
|Fair Value, September 30, 2009                              |  | $                                    | 508 |   |                                     | $ | 508 |  
|                                                            |  |                                      |     |   |                                     |   |     |  



14



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FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



Assets measured at fair value on a non-recurring basis at September 30, 2009 and December 31,
2008 are summarized below:



|                       |  |                   |       |                                                            |   |                                           |  |                                        |   |  |   |      
|---------------------- |  | ----------------- | ----- | ---------------------------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | - |  | - | -----
|Description            |  | September 30,2009 |       | (Level 1)Quoted Prices inActive Marketsfor IdenticalAssets |   | (Level 2)SignificantOtherObservableInputs |  | (Level 3)SignificantUnobservableInputs
|                       |  |                   |       |                                                           
|Impaired loans         |  | $                 | 1,861 |                                                            | $ |                                          |  | $                                      |  |  | $ | 1,861
|Foreclosed real estate |  |                   | 243   |                                                            |   |                                          |  |                                        |  |  |   | 243  



|               |  |                  |    |                                                            |   |                                           |  |                                        |   |  |   |   
|-------------- |  | ---------------- | -- | ---------------------------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | - |  | - | --
|Description    |  | December 31,2008 |    | (Level 1)Quoted Prices inActive Marketsfor IdenticalAssets |   | (Level 2)SignificantOtherObservableInputs |  | (Level 3)SignificantUnobservableInputs
|               |  |                  |    |                                                           
|Impaired loans |  | $                | 36 |                                                            | $ |                                          |  | $                                      |  |  | $ | 36

Total impaired loans, which are measured for impairment using the fair value of the collateral for
collateral-dependent loans, had a carrying amount of $2,490,000 and $72,000, net of the valuation allowances of $629,000 and $36,000 as of September 30, 2009 and December 31, 2008, respectively. This resulted in additional provision for
loan losses of $608,000 for the period ending September 30, 2009 and $0 for the period ending December 31, 2008.

Foreclosed real
estate is valued at its estimated fair market value, net of selling costs, at the time of foreclosure.

ASC Topic 825, Financial
Instruments, requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements.

The following information should not be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the
Corporations assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Corporations disclosures and those of other companies may not be
meaningful. The following methods and assumptions were used to estimate the fair values of the Corporations financial instruments at September 30, 2009 and December 31, 2008.



15



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



Cash and cash equivalents (carried at cost):

The carrying amounts reported in the balance sheet for cash and short-term instruments approximate those assets fair values.

Time certificates of deposit (carried at cost):

The carrying amount of time certificates of deposit approximates its 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 market 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 illiquidy 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.

Loans receivable (carried at cost):

For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values of fixed rate loans are estimated using discounted
cash flow analyses, using interest rates currently being offered in the market for loans with similar terms to borrowers of similar credit quality.

Impaired loans (generally carried at fair value):

Impaired loans are those that are
accounted for under ASC Section 310-10-35, Receivables  Overall  Subsequent Measurement,in which the Corporation has measured impairment generally based on the fair value of the loans collateral. Fair value is
generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is
significant to the fair value measurements.

Restricted investment in bank stock (carried at cost):

The carrying amount of restricted investment in bank stock approximates fair value.



16



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FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



Accrued interest receivable and payable (carried at cost):

The carrying amount of accrued interest receivable and accrued interest payable approximates its fair value.

Deposit liabilities (carried at cost):

The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the
reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule
of aggregated expected monthly maturities on time deposits.

Short-term borrowings (carried at cost):

The carrying amounts of short-term borrowings approximate their fair values.

Long-term debt (carried at cost):

Fair values of long-term debt are estimated using discounted cash flow analysis, based on rates currently available to the Corporation for advances from the FHLB with similar terms and remaining
maturities

Junior Subordinated debt (carried at cost):

Fair values of junior subordinated debt are estimated using discounted cash flow analysis, based on rates currently offered on such debt, with similar terms
and remaining maturities. As the Corporation has the ability to redeem the junior subordinated debt at any time, the fair value approximates its carrying value.

Off-balance sheet financial instruments (disclosed at cost):

Fair values for the
Corporations off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged to enter into similar agreements, taking into account, the remaining terms of the agreements and the
counterparties credit standing.



17



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



The estimated fair values of the Corporations financial instruments were as follows at
September 30, 2009 and December 31, 2008.



|                                        |  |                    |         |                   |   |                |  |           |         |  |   |        
|--------------------------------------- |  | ------------------ | ------- | ----------------- | - | -------------- |  | --------- | ------- |  | - | -------
|                                        |  | September 30, 2009 |         | December 31, 2008
|                                        |  | CarryingAmount     |         | FairValue         |   | CarryingAmount |  | FairValue
|                                        |  | (In Thousands)    
|                                        |  |                    |         |                  
|Financial assets:                       |  |                    |         |                   |   |                |  |           |         |  |   |        
|Cash and cash equivalents               |  | $                  | 15,283  |                   | $ | 15,283         |  | $         | 6,864   |  | $ | 6,864  
|Time certificates of deposit            |  |                    | 396     |                   |   | 396            |  |           | 396     |  |   | 396    
|Investment securities:                  |  |                    |         |                   |   |                |  |           |         |  |   |        
|Available for sale                      |  |                    | 77,799  |                   |   | 77,799         |  |           | 66,376  |  |   | 66,376 
|Held to maturity                        |  |                    | 30,281  |                   |   | 30,471         |  |           | 24,127  |  |   | 23,248 
|Loans, less allowance for loan losses   |  |                    | 211,440 |                   |   | 212,071        |  |           | 212,377 |  |   | 213,544
|Accrued interest receivable             |  |                    | 1,356   |                   |   | 1,356          |  |           | 1,241   |  |   | 1,241  
|Restricted investment in bank stocks    |  |                    | 2,661   |                   |   | 2,661          |  |           | 2,661   |  |   | 2,661  
|                                        |  |                    |         |                  
|Financial liabilities:                  |  |                    |         |                   |   |                |  |           |         |  |   |        
|Deposits                                |  |                    | 293,486 |                   |   | 298,558        |  |           | 262,606 |  |   | 263,790
|Short-term borrowings                   |  |                    | 4,214   |                   |   | 4,214          |  |           | 10,613  |  |   | 10,613 
|Long-term borrowings                    |  |                    | 22,000  |                   |   | 23,733         |  |           | 22,000  |  |   | 24,281 
|Junior subordinated debt                |  |                    | 5,155   |                   |   | 5,155          |  |           | 5,155   |  |   | 5,155  
|Accrued interest payable                |  |                    | 468     |                   |   | 468            |  |           | 570     |  |   | 570    
|                                        |  |                    |         |                  
|Off-balance sheet financial instruments |  |                    |        |                   |   |               |  |           |        |  |   |       

Note H  New and Recently Adopted Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards
(SFAS) No. 168, The FASB Accounting Standards CodificationTMand the Hierarchy of Generally Accepted Accounting Principles  a replacement of FASB Statement No. 162, (SFAS 168). SFAS 168 establishes the FASB Accounting Standards
CodificationTM(Codification) as the
source of authoritative generally accepted accounting principles (GAAP) for nongovernmental entities. The Codification does not change GAAP. Instead, it takes the thousands of individual pronouncements that currently comprise GAAP and
reorganizes them into approximately 90 accounting Topics, and displays all Topics using a consistent structure. Contents in each Topic are further organized first by Subtopic, then Section and finally Paragraph. The Paragraph level is the only level
that contains substantive content. Citing particular content in the Codification involves specifying the unique numeric path to the content through the Topic, Subtopic, Section and Paragraph structure. FASB suggests that all citations begin with
FASB ASC, were ASC stands for Accounting Standards Codification. Changes to the ASC subsequent to June 30, 2009 are referred to as Accounting Standards Updates (ASU).



18



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



In conjunction with the issuance of SFAS 168, the FASB also issued its first Accounting Standards Update
No. 2009-1, Topic 105  Generally Accepted Accounting Principles (ASU 2009-1) which includes SFAS 168 in its entirety as a transition to the ASC. ASU 2009-1 is effective for interim and annual periods ending after
September 15, 2009 and will not have an impact on the Corporations financial position or results of operations but will change the referencing system for accounting standards.

In August 2009, the FASB issued ASU 2009-05, Fair Value Measurements and Disclosures (Topic 820): Measuring Liabilities at Fair Value.The amendments within ASU 2009-05 clarify that in
circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques:

A valuation technique that uses:

a. The quoted price of the identical liability when traded as an asset.

b. Quoted prices for similar liabilities or similar liabilities when traded as assets.

Another valuation technique that is
consistent with the principles of Topic 820.

Two examples would be an income approach, such as a present value technique, or a market
approach, such as a technique that is based on the amount at the measurement date that the reporting entity would pay to transfer the identical liability or would receive to enter into the identical liability.

When estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the
existence of a restriction that prevents the transfer of the liability.

Both a quoted price in an active market for the identical liability
at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements.

This guidance is effective for the first reporting period (including interim periods) beginning after issuance. The adoption of this guidance did not have a
material impact on the Corporations financial statements.



19



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



In November 2008, the SEC released a proposed roadmap regarding the potential use by U.S. issuers of
financial statements prepared in accordance with International Financial Reporting Standards (IFRS). IFRS is a comprehensive series of accounting standards published by the International Accounting Standards Board (IASB). Under the
proposed roadmap, the Corporation may be required to prepare financial statements in accordance with IFRS as early as 2014. The SEC is currently required to make a determination in 2011 regarding the mandatory adoption of IFRS. The Corporation is
currently assessing the impact that this potential change would have on its consolidated financial statements, and it will continue to monitor the development of the potential implementation of IFRS.

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.



20



---

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, 2008). 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 judgment 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 for debt securities, management considers
whether (a) it has the intent to sell the security and (b) it is more likely than not that it will be required to sell the security prior to its anticipated recovery.

Impairment charges for the period ending September 30, 2009 relate to one equity security, a regional bank holding company, and a $15,000 charge was recorded for the three months ended June 30,
2009. This equity security has depreciated in fair value 70% during the last year, its dividend has been significantly reduced, and a near term recovery of value is not expected.

Financial Condition

Total assets of the Corporation increased $26,033,000 or 8.0% during the first nine months of 2009. Net loans decreased $937,000 or 0.4%, securities increased by $17,577,000 or 19.4% and cash and cash equivalents increased $8,419,000 or
122.7% from December 31, 2008 to September 30, 2009.

Total deposits increased by $30,880,000 or 11.8% from December 31, 2008.
Short-term borrowings decreased $6,399,000 or 60.3% during the same time period. The growth in deposits can be attributed to the Corporations continuing business development endeavors as well as depositors search for a safe and stable
return in light of the instability in the financial markets over the past year.



21



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Non-Performing Assets

Non-performing assets include loans on a non-accrual basis, loans past due more than ninety days and still accruing, troubled debt restructurings and
foreclosed real estate. These groups of assets represent the asset categories posing the greatest risk of loss to the Corporation. Non-accruing loans are loans no longer accruing interest due to apparent financial difficulties of the borrower. The
Corporation generally discontinues accrual of interest when principal or interest becomes doubtful based on prevailing economic conditions and collection efforts. Loans are returned to accrual status only when all factors indicating doubtful
collectibility cease to exist. Foreclosed real estate is acquired through foreclosure or in lieu of foreclosure and is recorded at fair value less costs to dispose at the date of foreclosure establishing a new cost basis. Gains on the sale of
foreclosed real estate are included in other income, while losses and writedowns resulting from periodic revaluations are included in other expenses.

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

Non-Performing Assets

(Dollars in Thousands)



|                                                                |  |           |        |   |            |   |        |  
|--------------------------------------------------------------- |  | --------- | ------ | - | ---------- | - | ------ | -
|                                                                |  | 9/30/2009 |        |   | 12/31/2008 |  
|                                                                |  |          
|Non-accrual loans                                               |  | $         | 4,404  |   |            | $ | 2,623  |  
|Accruing loans 90 days past due                                 |  |           |       |   |            |   |       |  
|                                                                |  |           |        |   |            |   |        |  
|                                                                |  |          
|Total Non-Performing Loans                                      |  |           | 4,404  |   |            |   | 2,623  |  
|                                                                |  |          
|Foreclosed real estate                                          |  |           | 243    |   |            |   |       |  
|                                                                |  |           |        |   |            |   |        |  
|                                                                |  |          
|Total Non-Performing Assets                                     |  | $         | 4,647  |   |            | $ | 2,623  |  
|                                                                |  |           |        |   |            |   |        |  
|                                                                |  |          
|Ratios:                                                         |  |           |        |   |            |   |        |  
|Non-performing loans to total loans                             |  |           | 2.08   | % |            |   | 1.24   | %
|Non-performing assets to total loans and foreclosed real estate |  |           | 2.20   | % |            |   | 1.24   | %
|Non-performing loans to allowance for loan losses               |  |           | 188.12 | % |            |   | 160.62 | %

Total non-performing assets at September 30, 2009 increased $2,024,000 since December 31,
2008 as a result of the increase in loans in non-accrual status and the increase in foreclosed real estate. This increase in non-accrual loans is primarily the result of a loan to a manufacturer of inventory closely tied to the construction
industry.



22



---

Results of Operations

Net income for the nine months ending September 30, 2009 was $1,875,000 or $1.34 per share compared to $1,834,000 or $1.31 per share for the same period
in 2008. Annualized return on average equity was 10.31% for the first nine months of 2009 and 11.15% for the same period in 2008. Annualized return on average assets was 0.74% for the first nine months of 2009 and 0.77% for the same period in 2008.

Net income for the quarter ending September 30, 2009 was $519,000 or $0.37 per share compared to $719,000 or $0.51 per share for the
same period in 2008. Annualized return on average equity was 8.27% for the third quarter of 2009 and 12.89% for the same period in 2008. Annualized return on average assets was 0.59% for the third quarter of 2009 and 0.89% for the same period in
2008.

Net interest income for the first nine months of 2009 increased by $681,000 or 10.3% compared to the same period in 2008. The reasons
for the increase in net interest income were an increase in interest earning assets and an increase in net interest margin. For the first nine months of 2009, the net interest margin on a fully tax equivalent (FTE) basis was 3.28% compared to 3.15%
for the same period in 2008. 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 0.45% from 3.23% during the first nine months of 2008 to 2.78% during the same period in 2009, which was partially offset by a decrease in the
yield on earning assets of 0.32% from 6.38% in 2008 to 6.06% in 2009.

Net interest income for the quarter ended September 30, 2009
decreased by $11,000 compared to the same period in 2008. Net interest margin for the quarter ended September 30, 2009 was 3.16% compared to 3.37% during the same period in 2008. The decrease in the yield on earning assets from 6.38% during the
third quarter of 2008 to 5.85% in 2009 was more than the decrease in the cost of funds from 3.01% during 2008 to 2.69% during 2009.

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 $737,000 provision for loan losses for the first nine months of 2009 compared to
$168,000 in 2008. The increase in the provision in 2009 compared to 2008 is a result of a significant charge for an impaired loan to a manufacturer of inventory closely tied to



23



---

the construction industry. After reviewing the collateral securing this loan, management feels the loan may be undersecured and provided a specific reserve allocation on it. In addition, the
provision for loan losses increased due to a slight increase in managements assessment of qualitative factors in light of the slight downturn in local economic and market conditions. As a percentage of loans, the allowance for loan losses was
1.10% at September 30, 2009, compared to 0.76% at year-end 2008 and 0.68% at September 30, 2008. Impaired loans were $2,490,000 at September 30, 2009 compared to $72,000 at December 31, 2008. 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 2009 increased by $659,000 or 39.1% compared to the same period in 2008. Income from fiduciary activities increased by $123,000 due to several estate settlements, increased activity led to ATM
card fees increasing by $15,000, securities gains increased $459,000, and other non-interest income increased $85,000 during the first nine months of 2009 compared to the same period in 2008. The conservative nature of our investment portfolio
coupled with the current interest rate scenario allowed us the opportunity to take advantage of gains in our portfolio.

Non-interest income
for the quarter ending September 30, 2009 was $852,000 compared to $583,000 in 2008. This increase is primarily related to the increase in income from fiduciary activities of $64,000 due to several estate settlements and an increase in
securities gains of $185,000, offset by a decrease in service charges on deposit accounts of $13,000.

Total non-interest expense increased in
the first nine months of 2009 by $806,000 compared to the first nine months of 2008. Employee compensation and benefits increased $277,000 in the first nine months of 2009 compared to 2008. The increase in salaries and wages is the result of merit
increases as well as additional staff positions added to support recent loan and deposit growth. The FDIC/OCC assessments increased $429,000 in the first nine months of 2009. An increase in FDIC insurance premiums coupled with a significant special
FDIC insurance assessment led to the dramatic increase in FDIC/OCC expenses. Director and advisory board compensation decreased $36,000, supplies and postage increased $15,000, and professional fees increased $90,000. 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.



24



---

During the quarter ending September 30, 2009, total non-interest expense increased $165,000 compared to
the third quarter of 2008. The primary reasons for this increase are the increases in employee compensation and benefits of $21,000, professional fees of $44,000, and FDIC/OCC expense of $114,000. The increase in FDIC/OCC assessment is the result of
an FDIC insurance increase as well as an increase in the deposit base. In light of near term increases in FDIC insurance premiums, the FDIC may require a three year prepayment of premiums at year end 2009.

Income tax expense was $436,000 for the nine month time period ending September 30, 2009 compared to $512,000 for the same time period in 2008. Income
tax expense as a percentage of income before income taxes was 18.9% for the period compared to 21.8% for 2008. The reason for the decrease in the effective tax rate is tax-exempt income as a percentage of income before taxes was higher in 2009 than
2008. 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.

Income tax expense was $71,000 for the three month time period ending September 30, 2009 compared to $220,000 for the same time period in 2008. Income tax expense as a percentage of income before
income taxes was 12.0% for the period compared to 23.4% for 2008. The reason for the decrease in the effective tax rate is tax-exempt income as a percentage of income before taxes was higher during the quarter in 2009 than 2008

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 $293,486,000 in deposits at September 30, 2009, which increased $30,880,000 over total deposits of $262,606,000 at December 31, 2008. Other sources of
liquidity at September 30, 2009 are available from the following: (1) investments in interest-bearing deposits with banks and federal funds sold, which totaled $8,910,000, (2) securities and time certificates of deposit maturing in
one year or less, which totaled $3,343,000, 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.



25



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Capital Resources

Total shareholders equity was $25,097,000 as of September 30, 2009, representing a $1,684,000 increase from December 31, 2008. The growth in
capital was a result of net earnings retention of $1,274,000, an increase in the accumulated other comprehensive income of $407,000, an increase in common stock and surplus of $51,000 as a result of our dividend reinvestment plan, partially offset
by purchases of treasury stock of $48,000. The increase in accumulated other comprehensive income is due to the change in value of the Corporations available for sale securities.

At September 30, 2009, the Bank had a leverage ratio of 8.09%, a Tier I capital to risk-based assets ratio of 14.58% and a total capital to risk-based assets ratio of 15.83%. 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. Planned capital expenditures are not expected to materially
reduce capital ratios.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

(Not required of a smaller reporting company.)

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, 2009. 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, 2009, 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

The Corporation and the Bank are involved from time to time in various legal proceedings
incidental to their business. Management is not aware of any litigation that would have a material adverse effect on the consolidated financial position of the Corporation.



26



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Item 1A. Risk Factors

(Not required of a smaller reporting company.)

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.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | The table below sets forth the information with respect to purchases made by or on behalf of the 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, 2009.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                 |  |                               |  |                           |      |                                                                             |   |                                                                            |       
|-------------------------------- |  | ----------------------------- |  | ------------------------- | ---- | --------------------------------------------------------------------------- | - | -------------------------------------------------------------------------- | ------
|                                 |  | TotalNumberof SharesPurchased |  | AveragePricePaidPer Share |      | Total Number ofShares Purchased asPartof a PubliclyAnnounced Plan orProgram |   | Maximum Number of SharesThat May Yet be Purchased Underthe Plan or Program
|                                 |  |                               |  |                          
|July 1 through July 31           |  | 0                             |  | $                         | 0.00 |                                                                             | 0 |                                                                            | 96,349
|                                 |  |                               |  |                          
|August 1 through August 31       |  | 0                             |  | $                         | 0.00 |                                                                             | 0 |                                                                            | 96,349
|                                 |  |                               |  |                          
|September 1 through September 30 |  | 0                             |  | $                         | 0.00 |                                                                             | 0 |                                                                            | 96,349
|                                 |  |                               |  |                           |      |                                                                             |   |                                                                            |       
|                                 |  |                               |  |                          
|Total for the period             |  | 0                             |  |                           |      |                                                                             | 0 |                                                                            |       
|                                 |  |                               |  |                           |      |                                                                             |   |                                                                            |       

Item 3. Defaults Upon Senior Securities

None.



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

None.

Item 5. Other Information

None.

Item 6. 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.      |  | 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.
|        | 
|11.     |  | Information concerning the computation of earnings per share is provided in Note D to the Consolidated Financial Statements, which is included in Part I, Item 1 of Form
10-Q.                                                                                                                                                                                                                                                                                                                 
|        | 
|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.                                                                                                                                                                                                                                                                                                                                               



28



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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 13, 2009 |  |  |  | BY:                                   |  | /S/    JODY D.
GRAYBILL      
|                        |  |  |  |                                       |  | Jody D. Graybill             
|                        |  |  |  |                                       |  | President                    
|                        |  |  |  |                                       |  | (Principal Executive Officer)
|                        |  |  | 
|Date: November 13, 2009 |  |  |  | BY:                                   |  | /S/    RICHARD R.
LEITZEL    
|                        |  |  |  |                                       |  | Richard R. Leitzel           
|                        |  |  |  |                                       |  | Vice President and           
|                        |  |  |  |                                       |  | Chief Financial Officer      
|                        |  |  |  |                                       |  | (Principal Financial Officer)



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