---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---

FORM 10-Q



---



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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006

or



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

FOR THE TRANSITION PERIOD FROM  to

Commission file number: 000-49736



---

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.)



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

(717) 436-2144

(Issuers telephone number, including area code)



---

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12-b-2
of the Exchange Act.

Large accelerated filer: ̈Accelerated filer: ̈Non-accelerated filer:  x

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

Indicate the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practical date: COMMON STOCK, Par Value $5.00 per share 1,400,000 shares outstanding as of October 31, 2006



---



---

PART I  FINANCIAL INFORMATION

Item 1. Financial Statements

FIRST COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars
In Thousands, Except Per Share Data)



|                                                                     |  |                    |         |   |                   |   |         |  
|-------------------------------------------------------------------- |  | ------------------ | ------- | - | ----------------- | - | ------- | -
|                                                                     |  | (unaudited)        |         |   |                   |  
|                                                                     |  | September 30, 2006 |         |   | December 31, 2005 |  
|ASSETS                                                               |  |                    |         |   |                   |   |         |  
|Cash & Due from Banks                                                |  | $                  | 5,461   |   |                   | $ | 7,648   |  
|Interest Bearing Deposits with Banks                                 |  |                    | 493     |   |                   |   | 502     |  
|Federal Funds Sold                                                   |  |                    | 115     |   |                   |   |        |  
|                                                                     |  |                    |         |   |                   |   |         |  
|Cash & Cash Equivalents                                              |  |                    | 6,069   |   |                   |   | 8,150   |  
|Time Certificates of Deposit                                         |  |                    | 1,881   |   |                   |   | 2,972   |  
|Securities available for sale                                        |  |                    | 48,568  |   |                   |   | 52,140  |  
|Securities held to maturity, fair value 2006 $ 24,493; 2005 $ 24,810 |  |                    | 24,404  |   |                   |   | 24,824  |  
|Loans - Net of allowance for loan losses 2006 $ 1,258; 2005 $ 1,264  |  |                    | 176,962 |   |                   |   | 161,800 |  
|Premises and Equipment                                               |  |                    | 7,324   |   |                   |   | 7,625   |  
|Restricted investment in bank stocks                                 |  |                    | 2,181   |   |                   |   | 2,012   |  
|Investment in life insurance                                         |  |                    | 4,630   |   |                   |   | 4,514   |  
|Other Assets                                                         |  |                    | 3,248   |   |                   |   | 3,120   |  
|                                                                     |  |                    |         |   |                   |   |         |  
|TOTAL ASSETS                                                         |  | $                  | 275,267 |   |                   | $ | 267,157 |  
|                                                                     |  |                    |         |   |                   |   |         |  
|LIABILITIES                                                          |  |                    |         |   |                   |   |         |  
|Deposits:                                                            |  |                    |         |   |                   |   |         |  
|Non-Interest Bearing                                                 |  | $                  | 22,971  |   |                   | $ | 25,508  |  
|Interest Bearing                                                     |  |                    | 196,104 |   |                   |   | 186,436 |  
|                                                                     |  |                    |         |   |                   |   |         |  
|Total Deposits                                                       |  |                    | 219,075 |   |                   |   | 211,944 |  
|Short-Term Borrowings                                                |  |                    | 7,720   |   |                   |   | 8,937   |  
|Long-Term Borrowings                                                 |  |                    | 22,000  |   |                   |   | 21,000  |  
|Junior Subordinated Debt                                             |  |                    | 5,155   |   |                   |   | 5,155   |  
|Other Liabilities                                                    |  |                    | 1,932   |   |                   |   | 1,789   |  
|                                                                     |  |                    |         |   |                   |   |         |  
|TOTAL LIABILITIES                                                    |  |                    | 255,882 |   |                   |   | 248,825 |  
|                                                                     |  |                    |         |   |                   |   |         |  
|SHAREHOLDERS EQUITY                                                 |  |                    |         |   |                   |   |         |  
|Preferred stock, without par value;                                  |  |                    |         |   |                   |   |         |  
|10,000,000 shares authorized and unissued                            |  |                    |        |   |                   |   |        |  
|Common stock, $ 5 par value;                                         |  |                    |         |   |                   |   |         |  
|10,000,000 shares authorized;                                        |  |                    |         |   |                   |   |         |  
|1,400,000 shares issued & outstanding                                |  |                    | 7,000   |   |                   |   | 7,000   |  
|Capital in Excess of Par Value                                       |  |                    | 245     |   |                   |   | 245     |  
|Retained Earnings                                                    |  |                    | 12,464  |   |                   |   | 11,492  |  
|Accumulated Other Comprehensive Loss                                 |  |                    | (324    | ) |                   |   | (405    | )
|                                                                     |  |                    |         |   |                   |   |         |  
|TOTAL SHAREHOLDERS EQUITY                                           |  |                    | 19,385  |   |                   |   | 18,332  |  
|                                                                     |  |                    |         |   |                   |   |         |  
|TOTAL LIABILITIES & SHAREHOLDERS EQUITY                             |  | $                  | 275,267 |   |                   | $ | 267,157 |  
|                                                                     |  |                    |         |   |                   |   |         |  

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 Ended September 30, |       | Nine Months Ended September 30,
|                                                    |  | 2006                             |       | 2005                            |   | 2006  |  | 2005
|INTEREST INCOME                                     |  |                                  |       |                                 |   |       |  |      |        |  |   |      
|Interest & Fees on Loans                            |  | $                                | 2,987 |                                 | $ | 2,555 |  | $    | 8,607  |  | $ | 7,433
|Interest on Taxable Securities                      |  |                                  | 536   |                                 |   | 518   |  |      | 1,605  |  |   | 1,487
|Interest on Tax-Exempt Securities                   |  |                                  | 215   |                                 |   | 219   |  |      | 644    |  |   | 641  
|Other Interest & Dividends                          |  |                                  | 68    |                                 |   | 63    |  |      | 215    |  |   | 150  
|                                                    |  |                                  |       |                                 |   |       |  |      |        |  |   |      
|TOTAL INTEREST INCOME                               |  |                                  | 3,806 |                                 |   | 3,355 |  |      | 11,071 |  |   | 9,711
|                                                    |  |                                  |       |                                 |   |       |  |      |        |  |   |      
|INTEREST EXPENSE                                    |  |                                  |       |                                 |   |       |  |      |        |  |   |      
|Interest on Deposits                                |  |                                  | 1,600 |                                 |   | 1,292 |  |      | 4,503  |  |   | 3,654
|Interest on Short Term Borrowings                   |  |                                  | 94    |                                 |   | 31    |  |      | 228    |  |   | 80   
|Interest on Long Term Borrowings                    |  |                                  | 354   |                                 |   | 297   |  |      | 1,036  |  |   | 796  
|                                                    |  |                                  |       |                                 |   |       |  |      |        |  |   |      
|TOTAL INTEREST EXPENSE                              |  |                                  | 2,048 |                                 |   | 1,620 |  |      | 5,767  |  |   | 4,530
|                                                    |  |                                  |       |                                 |   |       |  |      |        |  |   |      
|NET INTEREST INCOME                                 |  |                                  | 1,758 |                                 |   | 1,735 |  |      | 5,304  |  |   | 5,181
|Provision for Loan Losses                           |  |                                  |      |                                 |   |      |  |      |       |  |   | 15   
|                                                    |  |                                  |       |                                 |   |       |  |      |        |  |   |      
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |  |                                  | 1,758 |                                 |   | 1,735 |  |      | 5,304  |  |   | 5,166
|                                                    |  |                                  |       |                                
|NON-INTEREST INCOME                                 |  |                                  |       |                                 |   |       |  |      |        |  |   |      
|Service Charges on Deposits                         |  |                                  | 186   |                                 |   | 164   |  |      | 512    |  |   | 423  
|Fiduciary Activities                                |  |                                  | 90    |                                 |   | 75    |  |      | 240    |  |   | 235  
|Earnings on Investment in Life Insurance            |  |                                  | 50    |                                 |   | 48    |  |      | 145    |  |   | 142  
|ATM Card Fees                                       |  |                                  | 123   |                                 |   | 105   |  |      | 337    |  |   | 278  
|Realized Gains on Sales of Securities               |  |                                  | 24    |                                 |   |      |  |      | 22     |  |   | 129  
|Other Income                                        |  |                                  | 61    |                                 |   | 43    |  |      | 156    |  |   | 117  
|                                                    |  |                                  |       |                                 |   |       |  |      |        |  |   |      
|TOTAL OTHER INCOME                                  |  |                                  | 534   |                                 |   | 435   |  |      | 1,412  |  |   | 1,324
|                                                    |  |                                  |       |                                 |   |       |  |      |        |  |   |      
|NON-INTEREST EXPENSES                               |  |                                  |       |                                 |   |       |  |      |        |  |   |      
|Employee Compensation & Benefits                    |  |                                  | 821   |                                 |   | 819   |  |      | 2,531  |  |   | 2,510
|Net Occupancy & Equipment                           |  |                                  | 296   |                                 |   | 246   |  |      | 837    |  |   | 735  
|ATM Expense                                         |  |                                  | 82    |                                 |   | 70    |  |      | 231    |  |   | 200  
|Professional & Regulatory Fees                      |  |                                  | 63    |                                 |   | 68    |  |      | 157    |  |   | 192  
|Director & Advisory Boards Compensation             |  |                                  | 68    |                                 |   | 71    |  |      | 211    |  |   | 210  
|Supplies & Postage                                  |  |                                  | 60    |                                 |   | 57    |  |      | 204    |  |   | 168  
|Other Non-Interest Expenses                         |  |                                  | 267   |                                 |   | 247   |  |      | 794    |  |   | 706  
|                                                    |  |                                  |       |                                 |   |       |  |      |        |  |   |      
|TOTAL NON-INTEREST EXPENSES                         |  |                                  | 1,657 |                                 |   | 1,578 |  |      | 4,965  |  |   | 4,721
|                                                    |  |                                  |       |                                 |   |       |  |      |        |  |   |      
|Income Before Income Taxes                          |  |                                  | 635   |                                 |   | 592   |  |      | 1,751  |  |   | 1,769
|Applicable Income Taxes                             |  |                                  | 127   |                                 |   | 117   |  |      | 331    |  |   | 353  
|                                                    |  |                                  |       |                                 |   |       |  |      |        |  |   |      
|NET INCOME                                          |  | $                                | 508   |                                 | $ | 475   |  | $    | 1,420  |  | $ | 1,416
|                                                    |  |                                  |       |                                 |   |       |  |      |        |  |   |      
|Basic Earnings Per Share                            |  | $                                | 0.36  |                                 | $ | 0.34  |  | $    | 1.01   |  | $ | 1.01 
|                                                    |  |                                  |       |                                 |   |       |  |      |        |  |   |      
|Dividends Per Share                                 |  | $                                | 0.11  |                                 | $ | 0.10  |  | $    | 0.32   |  | $ | 0.29 
|                                                    |  |                                  |       |                                 |   |       |  |      |        |  |   |      

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, 2005

(Unaudited)

(Dollars In Thousands, Except Per Share Data)



|                                                                               |  |              |       |                                |   |                   |  |   |                                               |   |  |       |      |   |  |   |        |  
|------------------------------------------------------------------------------ |  | ------------ | ----- | ------------------------------ | - | ----------------- |  | - | --------------------------------------------- | - |  | ----- | ---- | - |  | - | ------ | -
|                                                                               |  | Common Stock |       | Capital In Excess of Par Value |   | Retained Earnings |  |   | Accumulated Other Comprehensive Income (Loss) |   |  | Total |     
|Balance December 31, 2004                                                      |  | $            | 7,000 |                                | $ | 245               |  | $ | 9,967                                         |   |  | $     | 196  |   |  | $ | 17,408 |  
|Comprehensive income:                                                          |  |              |       |                                |   |                   |  |   |                                               |   |  |       |      |   |  |   |        |  
|Net Income                                                                     |  |              |       |                                |   |                   |  |   | 1,416                                         |   |  |       |      |   |  |   | 1,416  |  
|Net change in unrealized losses on securities available for sale, net of taxes |  |              |       |                                |   |                   |  |   |                                               |   |  |       | (260 | ) |  |   | (260   | )
|                                                                               |  |              |       |                                |   |                   |  |   |                                               |   |  |       |      |   |  |   |        |  
|Total comprehensive income                                                     |  |              |       |                                |   |                   |  |   |                                               |   |  |       |      |   |  |   | 1,156  |  
|                                                                               |  |              |       |                                |  
|Cash dividends, $.29 per share                                                 |  |              |       |                                |   |                   |  |   | (406                                          | ) |  |       |      |   |  |   | (406   | )
|                                                                               |  |              |       |                                |   |                   |  |   |                                               |   |  |       |      |   |  |   |        |  
|Balance September 30, 2005                                                     |  | $            | 7,000 |                                | $ | 245               |  | $ | 10,977                                        |   |  | $     | (64  | ) |  | $ | 18,158 |  
|                                                                               |  |              |       |                                |   |                   |  |   |                                               |   |  |       |      |   |  |   |        |  

FIRST COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

For the Nine Months Ended September 30, 2006

(Unaudited)

(Dollars In Thousands, Except Per Share Data)



|                                                                               |  |              |       |                                |   |                   |  |   |                                      |   |  |       |      |   |  |   |        |  
|------------------------------------------------------------------------------ |  | ------------ | ----- | ------------------------------ | - | ----------------- |  | - | ------------------------------------ | - |  | ----- | ---- | - |  | - | ------ | -
|                                                                               |  | Common Stock |       | Capital In Excess of Par Value |   | Retained Earnings |  |   | Accumulated Other Comprehensive Loss |   |  | Total |     
|Balance December 31, 2005                                                      |  | $            | 7,000 |                                | $ | 245               |  | $ | 11,492                               |   |  | $     | (405 | ) |  | $ | 18,332 |  
|Comprehensive income:                                                          |  |              |       |                                |   |                   |  |   |                                      |   |  |       |      |   |  |   |        |  
|Net Income                                                                     |  |              |       |                                |   |                   |  |   | 1,420                                |   |  |       |      |   |  |   | 1,420  |  
|Net change in unrealized losses on securities available for sale, net of taxes |  |              |       |                                |   |                   |  |   |                                      |   |  |       | 81   |   |  |   | 81     |  
|                                                                               |  |              |       |                                |   |                   |  |   |                                      |   |  |       |      |   |  |   |        |  
|Total comprehensive income                                                     |  |              |       |                                |   |                   |  |   |                                      |   |  |       |      |   |  |   | 1,501  |  
|                                                                               |  |              |       |                                |  
|Cash dividends, $.32 per share                                                 |  |              |       |                                |   |                   |  |   | (448                                 | ) |  |       |      |   |  |   | (448   | )
|                                                                               |  |              |       |                                |   |                   |  |   |                                      |   |  |       |      |   |  |   |        |  
|Balance September 30, 2006                                                     |  | $            | 7,000 |                                | $ | 245               |  | $ | 12,464                               |   |  | $     | (324 | ) |  | $ | 19,385 |  
|                                                                               |  |              |       |                                |   |                   |  |   |                                      |   |  |       |      |   |  |   |        |  

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 Ended September 30, |        
|                                                                                  |  | 2006                            |         |   | 2005 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |                                 |         |   |      |   |         |  
|Net income                                                                        |  | $                               | 1,420   |   |      | $ | 1,416   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                 |         |   |      |   |         |  
|Provision for loan losses                                                         |  |                                 |        |   |      |   | 15      |  
|Depreciation and amortization                                                     |  |                                 | 441     |   |      |   | 441     |  
|Net amortization of securities premium                                            |  |                                 | 166     |   |      |   | 354     |  
|Net realized gains on sales of securities                                         |  |                                 | (22     | ) |      |   | (129    | )
|Earnings on life insurance                                                        |  |                                 | (145    | ) |      |   | (142    | )
|Increase in other assets                                                          |  |                                 | (133    | ) |      |   | (737    | )
|Increase in other liabilities                                                     |  |                                 | 143     |   |      |   | 131     |  
|                                                                                  |  |                                 |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                                 | 1,870   |   |      |   | 1,349   |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |                                 |         |   |      |   |         |  
|Securities held to maturity:                                                      |  |                                 |         |   |      |   |         |  
|Maturities, calls and principal repayments                                        |  |                                 | 4,973   |   |      |   | 1,850   |  
|Purchases                                                                         |  |                                 | (4,636  | ) |      |   | (4,141  | )
|Securities available for sale:                                                    |  |                                 |         |   |      |   |         |  
|Maturities, calls and principal repayments                                        |  |                                 | 11,399  |   |      |   | 11,638  |  
|Purchases                                                                         |  |                                 | (7,881  | ) |      |   | (14,695 | )
|Proceeds from sales                                                               |  |                                 | 108     |   |      |   | 145     |  
|Net increase in loans receivable                                                  |  |                                 | (15,162 | ) |      |   | (8,765  | )
|Net increase in restricted investment in bank stocks                              |  |                                 | (169    | ) |      |   | (52     | )
|Purchases of premises and equipment                                               |  |                                 | (140    | ) |      |   | (616    | )
|Net maturities (purchases) of interest bearing time deposits                      |  |                                 | 1,091   |   |      |   | (990    | )
|Proceeds from sale of foreclosed real estate                                      |  |                                 |        |   |      |   | 59      |  
|                                                                                  |  |                                 |         |   |      |   |         |  
|Net cash used in investing activities                                             |  |                                 | (10,417 | ) |      |   | (15,567 | )
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |                                 |         |   |      |   |         |  
|Net decrease in non-interest bearing demand and savings deposits                  |  |                                 | (2,537  | ) |      |   | (1,027  | )
|Net increase in time deposits                                                     |  |                                 | 9,668   |   |      |   | 10,952  |  
|Net increase (decrease) in short-term borrowings                                  |  |                                 | (1,217  | ) |      |   | 850     |  
|Proceeds from long-term borrowings                                                |  |                                 | 5,000   |   |      |   | 5,000   |  
|Repayment of long-term borrowings                                                 |  |                                 | (4,000  | ) |      |   |        |  
|Dividends paid                                                                    |  |                                 | (448    | ) |      |   | (406    | )
|                                                                                  |  |                                 |         |   |      |   |         |  
|Net cash provided by financing activities                                         |  |                                 | 6,466   |   |      |   | 15,369  |  
|                                                                                  |  |                                 |         |   |      |   |         |  
|Net increase (decrease) in cash and cash equivalents                              |  |                                 | (2,081  | ) |      |   | 1,151   |  
|Cash and cash equivalents:                                                        |  |                                 |         |   |      |   |         |  
|Beginning of year                                                                 |  |                                 | 8,150   |   |      |   | 8,106   |  
|                                                                                  |  |                                 |         |   |      |   |         |  
|End of period                                                                     |  | $                               | 6,069   |   |      | $ | 9,257   |  
|                                                                                  |  |                                 |         |   |      |   |         |  
|SUPPLEMENTAL DISCLOSURES:                                                         |  |                                 |         |   |      |   |         |  
|Cash payments for interest                                                        |  | $                               | 5,693   |   |      | $ | 4,518   |  
|                                                                                  |  |                                 |         |   |      |   |         |  
|Cash payments for income taxes                                                    |  | $                               | 394     |   |      | $ | 384     |  
|                                                                                  |  |                                 |         |   |      |   |         |  
|NON CASH INVESTING:                                                               |  |                                 |         |   |      |   |         |  
|Transfer of loans to foreclosed real estate                                       |  | $                               |        |   |      | $ | 132     |  
|                                                                                  |  |                                 |         |   |      |   |         |  

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, 2006

Note A  Basis of Presentation

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

The accompanying unaudited consolidated
financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and are presented in accordance with the instructions to Form 10-Q and Rule 10-01 of the Securities and Exchange
Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2006, are not necessarily indicative of the results that may be expected for the year ending
December 31, 2006.

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, 2005, included in the Corporations Form 10-K filed with the Securities and Exchange Commission on March 14, 2006.

Note B  Accounting Policies

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



6



---

Note C  Comprehensive Loss

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



|                                                            |  |                                  |      |   |                                 |   |      |      |  |   |      |   |  |   |      |  
|----------------------------------------------------------- |  | -------------------------------- | ---- | - | ------------------------------- | - | ---- | ---- |  | - | ---- | - |  | - | ---- | -
|                                                            |  | Three Months Ended September 30, |      |   | Nine Months Ended September 30, |  
|                                                            |  | 2006                             |      |   | 2005                            |   |      | 2006 |  |   | 2005 |  
|                                                            |  | (Dollars in Thousands)           |     
|Unrealized holding gains (losses) arising during the period |  | $                                | 515  |   |                                 | $ | (158 | )    |  | $ | 137  |   |  | $ | (271 | )
|Reclassification of gains realized in net income            |  |                                  | (24  | ) |                                 |   |     |      |  |   | (22  | ) |  |   | (129 | )
|                                                            |  |                                  |      |   |                                 |   |      |      |  |   |      |   |  |   |      |  
|                                                            |  |                                  | 491  |   |                                 |   | (158 | )    |  |   | 115  |   |  |   | (400 | )
|Deferred income tax effect                                  |  |                                  | (164 | ) |                                 |   | 52   |      |  |   | (34  | ) |  |   | 140  |  
|                                                            |  |                                  |      |   |                                 |   |      |      |  |   |      |   |  |   |      |  
|Change in accumulated other comprehensive income            |  | $                                | 327  |   |                                 | $ | (106 | )    |  | $ | 81   |   |  | $ | (260 | )
|                                                            |  |                                  |      |   |                                 |   |      |      |  |   |      |   |  |   |      |  

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 1,400,000 in 2006 and 2005.

Note E - Guarantees

The Corporation does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit. Standby letters of credit written are conditional commitments issued by
the Corporation to guarantee the performance of a customer to a third party. Generally, all letters of credit, when issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as those
that are involved in extending loan facilities to customers. The Corporation, generally, holds collateral and/or personal guarantees supporting these commitments. The Corporation had $368,000 of standby letters of credit as of September 30,
2006. 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, 2006 for guarantees under standby letters of credit issued is not material.



7



---

Note F  New Accounting Pronouncements

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments. SFAS No. 155 amends FASB Statement No. 133 and FASB Statement No. 140, and
improves the financial reporting of certain hybrid financial instruments by requiring more consistent accounting that eliminates exemptions and provides a means to simplify the accounting for these instruments. Specifically, SFAS No. 155
allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. SFAS
No. 155 is effective for all financial instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006. The Company is required to adopt the provisions of SFAS
No. 155, as applicable, beginning in fiscal year 2007. Management does not believe the adoption of SFAS No. 155 will have a material impact on the Companys financial position and results of operations.

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets  An Amendment of FASB Statement
No. 140 (SFAS 156). SFAS 156 requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. The statement permits, but does not require, the
subsequent measurement of servicing assets and servicing liabilities at fair value. SFAS 156 is effective as of the beginning of an entitys first fiscal year that begins after September 15, 2006, which for the Company will be as of
the beginning of fiscal 2007. The Company does not believe that the adoption of SFAS 156 will have any effect on its financial statements.

In July
2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting
for uncertainty in tax positions. This Interpretation requires that companies recognize in their financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits
of the position. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. We are
currently evaluating the impact of adopting FIN 48 on our financial statements. The Company does not believe that the adoption of FIN 48 will have a significant effect on its financial statements.

In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair
value under GAAP, and expands disclosures about fair value measurements. FASB Statement No. 157 applies to other accounting pronouncements that require or permit fair



8



---

value measurements. The new guidance is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and for interim periods within those fiscal years. We are currently evaluating the potential impact, if any, of the adoption of FASB Statement No. 157 on our consolidated financial position, results of operations and
cash flows.

On September 29, 2006, the Financial Accounting Standards Board FASB issued SFAS No. 158, Employers Accounting
for Defined Benefit Pension and Other Postretirement Plans (SFAS 158), which amends SFAS 87 and SFAS 106 to require recognition of the overfunded or underfunded status of pension and other postretirement benefit plans on the balance
sheet. Under SFAS 158, gains and losses, prior service costs and credits, and any remaining transition amounts under SFAS 87 and SFAS 106 that have not yet been recognized through net periodic benefit cost will be recognized in accumulated other
comprehensive income, net of tax effects, until they are amortized as a component of net periodic cost. The measurement date  the date at which the benefit obligation and plan assets are measured  is required to be the companys
fiscal year end. SFAS 158 is effective for publicly-held companies for fiscal years ending after December 15, 2006, except for the measurement date provisions, which are effective for fiscal years ending after December 15, 2008. The
Company currently has no plans subject to SFAS 158.

On September 13, 2006, the Securities and Exchange Commission SEC issued Staff
Accounting Bulleting No. 108 (SAB 108). SAB 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a potential current year misstatement.
Prior to SAB 108, Companies might evaluate the materiality of financial-statement misstatements using either the income statement or balance sheet approach, with the income statement approach focusing on new misstatements added in the current year,
and the balance sheet approach focusing on the cumulative amount of misstatement present in a companys balance sheet. Misstatements that would be material under one approach could be viewed as immaterial under another approach, and not be
corrected. SAB 108 now requires that companies view financial statement misstatements as material if they are material according to either the income statement or balance sheet approach. The Company has analyzed SAB 108 and determined that upon
adoption it will have no impact on the reported results of operations or financial condition.

In September 2006, the FASB issued FASB Staff Position AUG
AIR-1, Accounting for Planned Major Maintenance Activities which is effective for fiscal years beginning after December 15, 2006. This position statement eliminates the accrue-in-advance method of accounting for planned major
maintenance activities. We do not expect this pronouncement to have a significant impact on the determination or reporting of our financial results.



9



---

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.

Critical Accounting Policies

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

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require the
Corporation to make estimates and assumptions (see footnote 1 to the financial statements for the year ended December 31, 2005). The Corporation believes that of its significant accounting policies, the allowance for loan losses involves a
higher degree of judgment and complexity.



10



---

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

Financial Condition

Total assets of
the Corporation increased $8,110,000 or 3.0% during the first nine months of 2006. Net loans increased $15,162,000 or 9.4% while securities decreased by $3,992,000 or 5.2% from December 31, 2005 to September 30, 2006. The loan growth was
principally in the Banks residential loan portfolio.

Total deposits increased by $7,131,000 or 3.4% from December 31, 2005 and long-term
borrowings increased by $1,000,000 or 4.8% during the same time period. The Corporations expansion and business development were primarily responsible for the deposit growth during the first nine months of 2006. The bulk of the deposit growth
was in time certificates of deposit.

Results of Operations

Net income for the nine months ending September 30, 2006 was $1,420,000 or $1.01 per share compared to $1,416,000 or $1.01 per share for the same period in 2005. Annualized return on average equity was 10.12% for the first nine months
of 2006 and 10.69% for the same period in 2005. Annualized return on average assets was 0.70% for the first nine months of 2006 and 0.75% for the same period in 2005.

Net income for the quarter ending September 30, 2006 was $508,000 or $0.36 per share compared to $475,000 or $0.34 per share for the same period in 2005. Annualized return on average equity was 10.63% for the
third quarter of 2006 and 10.43% for the same period in 2005. Annualized return on average assets for the third quarter was 0.74% compared to 0.72% during the third quarter of 2005.

Net interest income for the first nine months of 2006 increased by $123,000 or 2.4% compared to the same period in 2005. This increase is primarily a result of increased volume of interest earning assets as well as an
increase in the yield on earning assets partially offset by an increase in the volume of interest bearing liabilities and an increase in the cost of those liabilities. For the first nine months of 2006, the net interest margin on a



11



---

fully tax equivalent (FTE) basis was 3.04% compared to 3.18% for the same period in 2005. The FTE basis is calculated by
grossing up the yield on tax-exempt securities and loans by the federal tax rate of 34%, in order that the yield on tax-exempt assets may be comparable to interest earned on taxable assets. The primary driver of the decrease in the net interest
margin was the increase in the cost of funds of 0.48% from 2.61% during the first nine months of 2005 to 3.09% during the same time period in 2006.

Net
interest income for the quarter ended September 30, 2006 increased by $23,000 compared to the same period in 2005. Net interest margin for the quarter ended September 30, 2006 was 2.96% compared to 3.08% during the same period in 2005. The
increase in the yield on earning assets of 0.42% from 5.76% during the third quarter of 2005 to 6.18% during the same period in 2006 was offset by the increase in the cost of funds of 0.54% from 2.68% during the third quarter of 2005 to 3.22% during
the same time period in 2006. Given the current interest rate scenario, expectations are for the net interest margin to remain relatively stable for the next few quarters.

The Corporation recorded no provision for loan losses for the first nine months of 2006 compared to $15,000 for the first nine months of 2005. As a percentage of loans, the allowance for loan losses was 0.71% at
September 30, 2006, compared to 0.78% at year-end 2005 and 0.81% at September 30, 2005. The decrease in the allowance for loan loss percentage is due to the increase in loan volume with 71.2 % of that increase in residential real
estate secured loans. Provisions for loan losses are charged to income to bring the allowance for loan losses to a level deemed appropriate by management. Management determines the adequacy of the allowance based on on-going quarterly assessments of
the loan portfolio, including such factors as: changes in the nature and volume of the portfolio, effects of concentrations of credit, current and projected economic and business conditions, regulatory and consultant recommendations, repayment
patterns on loans, borrowers financial condition, current charge-offs, trends in volume and severity of past due loans and classified loans, potential problem loans and supporting collateral. After reviewing the growth in the loan portfolio as
well as the other factors listed above, 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 2006 increased by $88,000 or 6.6% compared to the same period in 2005. Gains on sales of securities decreased by $107,000, increased activity led to ATM card fees
increasing by $59,000, and service charges on deposit accounts increased by $89,000 during the first nine months of 2006 compared to the same period in 2005. The increase in service charges follows the introduction of our overdraft protection
program which was instituted during the second quarter of 2005.



12



---

Non-interest income for the quarter ending September 30, 2006 was $534,000 compared to $435,000 in 2005. This
increase is primarily related to the increase in service charges on deposit accounts of $22,000, an increase in ATM card fees of $18,000, an increase of $15,000 in income from fiduciary activities, and an increase in gains on sales of securities of
$24,000.

Total non-interest expense increased in the first nine months of 2006 by $244,000 or 5.2% compared to the first nine months of 2005. Net
occupancy & equipment expense increased $102,000 or 13.9% primarily as a result of an increase in maintenance fees and equipment repairs, supplies and postage expense increased $36,000, ATM expense increased $31,000, and other operating
expenses increased $88,000 or 12.5% primarily as a result of increased loan collection costs, advertising costs, and internet banking costs. These increases were offset by a decrease in professional fees of $ 35,000. As the Corporation continues to
add 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.

During the quarter ending September 30, 2006, total non-interest expense increased $79,000 compared to the third quarter of 2005. This increase was
reflected in net occupancy & equipment expense increasing by $50,000 as a result of increasing maintenance fees and equipment repairs, ATM expense increasing by $12,000, and other non-interest expense increasing by $20,000.

Income tax expense was $331,000 for the nine month time period ending September 30, 2006 compared to $353,000 for the same time period in 2005. Income tax expense
as a percentage of income before income taxes was 18.9% for the period compared to 20.0% for 2005. 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. In 2006, these sources of tax-exempt income represented a larger portion of the Corporations pre-tax income thereby reducing the Corporations effective tax rate.

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 $219,075,000 in deposits at September 30, 2006, which increased $7,131,000 over total deposits of $211,944,000 at December 31, 2005. Other sources of liquidity at September 30, 2006 are
available from the



13



---

following: (1) investments in interest-bearing deposits with banks and federal funds sold, which totaled $608,000,
(2) securities and time certificates of deposit maturing in one year or less, which totaled $8,493,000, and (3) investments in mortgage-backed securities, which supply income and principal cash flow streams on an ongoing basis. In
addition, the Corporation has established federal funds lines of credit with Atlantic Central Bankers Bank and with the Federal Home Loan Bank of Pittsburgh, which can be drawn upon if needed as a source of liquidity. Management is of the opinion
that the Corporations liquidity is sufficient to meet its anticipated needs.

Capital Resources

Total shareholders equity was $19,385,000 as of September 30, 2006, representing a $1,053,000 increase from December 31, 2005. The growth in capital was a
result of net earnings retention of $972,000 and a decrease in the accumulated other comprehensive loss of $81,000. The other comprehensive income during the period is due to the change in value of the Corporations available for sale
securities.

At September 30, 2006, the Bank had a leverage ratio of 8.79%, a Tier I capital to risk-based assets ratio of 15.45% and a total capital
to risk-based assets ratio of 16.26%. These ratios indicate the Bank exceeds the federal regulatory minimum requirements for a well capitalized bank. The Corporations ratios are not materially different than those of the Bank.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There are no material changes in the Corporations interest rate risk exposure since December 31, 2005. Please refer to the Annual Report on Form 10-K of First Community Financial Corporation, filed with the
Securities and Exchange Commission on March 14, 2006.

Item 4. Controls and Procedures

We maintain a system of controls and procedures designed to provide reasonable assurance as to the reliability of the financial statements and other disclosures included
in this report, as well as to safeguard assets from unauthorized use or disposition. The Corporations 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, 2006. Based upon that evaluation, our President and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to information
required to be included in our periodic Securities and Exchange Commission filings. There was no significant change in our internal control over financial reporting that occurred during the quarter ended September 30, 2006, that materially
affected, or is reasonably likely to materially affect, the Corporations internal control over financial reporting.



14



---

PART II  OTHER INFORMATION

Item 1. Legal Proceedings

Not Applicable

Item 1A. Risk Factors

There are no material changes in the
Corporations risk factors since December 31, 2005. Please refer to the Annual Report on Form 10-K of First Community Financial Corporation, filed with the Securities and Exchange Commission on March 14, 2006.

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

Not Applicable

Item 3. Defaults
Upon Senior Securities

Not Applicable

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

Not Applicable

Item 5. Other Information

Not Applicable

Item 6. Exhibits

(a) Exhibits



|        |  |                                                                                                                                                                                                                                               
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Title                                                                                                                                                                                                                                         
|3.1     |  | Articles of Incorporation of the Corporation. (Incorporated by reference to Exhibit 2(a) to the Corporations December 31, 2001 Registration Statement on Form 10-SB, as filed with the
Securities and Exchange Commission on April 17, 2002.)
|        | 
|3.2     |  | Bylaws of the Corporation. (Incorporated by reference to Exhibit 2(b) to the Corporations Registration Statement on Form 10-SB, as filed with the Securities and Exchange Commission on
April 17, 2002.)                                     



15



---

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.1  |  | Certain instruments defining the rights of the holders of long-term debt of the Corporation and certain of its Subsidiaries, none of which authorize a total amount of indebtedness in excess
of 10% of the total assets of the Corporation and its Subsidiaries on a consolidated basis, have not been filed as Exhibits in accordance with Item 601(b)(4)(iii) of Regulation S-K. The Corporation hereby agrees to furnish a copy of any of
these instruments to the Commission upon request.
|     | 
|31.1 |  | Certification of 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 Chief Financial Officer of First Community Financial Corporation Pursuant to Securities and Exchange Commission Rule 13a-14(a) / 15d-14(a).                                                                                                                                                                                                                                                                                                                                   
|     | 
|32.1 |  | Certification of Principal Executive Officer of First Community Financial Corporation Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                               
|     | 
|32.2 |  | Certification of Chief Financial Officer of First Community Financial Corporation Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                   



16



---

SIGNATURES

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



|                        |  |                                       |  |                              
|----------------------- |  | ------------------------------------- |  | -----------------------------
|                        |  | FIRST COMMUNITY FINANCIAL CORPORATION
|                        |  | (Registrant)                         
|                        |  |                                      
|Date: November 14, 2006 |  | BY:                                   |  | /s/ Jody D. Graybill         
|                        |  |                                       |  | Jody D. Graybill             
|                        |  |                                       |  | President                    
|                        |  |                                       |  | (Principal Executive Officer)
|                        |  |                                      
|Date: November 14, 2006 |  | BY:                                   |  | /s/ Richard R. Leitzel       
|                        |  |                                       |  | Richard R. Leitzel           
|                        |  |                                       |  | Vice President and           
|                        |  |                                       |  | Chief Financial Officer      
|                        |  |                                       |  | (Principal Financial Officer)



17