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 June 30, 2010



| ̈ | 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 of issuers classes of common stock, as of the latest practicable date:



|                              |  |                             
|----------------------------- |  | ----------------------------
|Class                         |  | Outstanding at July 31, 2010
|Common Stock, par value $5.00 |  | 1,402,174 Shares            









---

PART I  FINANCIAL INFORMATION



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



FIRST COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars In Thousands, Except Share Data)



|                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                                                                                                    |  | June 30, 2010 |         |   | December 31, 2009 |  
|                                                                                                                                                                    |  | (unaudited)   |         |   | (audited)         |  
|ASSETS                                                                                                                                                              |  |               |         |   |                   |   |         |  
|Cash & due from banks                                                                                                                                               |  | $             | 7,773   |   |                   | $ | 6,564   |  
|Interest bearing deposits with banks                                                                                                                                |  |               | 616     |   |                   |   | 351     |  
|Federal funds sold                                                                                                                                                  |  |               | 3,579   |   |                   |   | 1,718   |  
|                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|Cash & cash equivalents                                                                                                                                             |  |               | 11,968  |   |                   |   | 8,633   |  
|Time certificates of deposit                                                                                                                                        |  |               | 297     |   |                   |   | 396     |  
|Securities available for sale                                                                                                                                       |  |               | 79,453  |   |                   |   | 81,437  |  
|Securities held to maturity, fair value 2010 $ 28,961; 2009 $ 29,715                                                                                                |  |               | 29,239  |   |                   |   | 30,204  |  
|Loans - net of allowance for loan losses 2010 $ 1,995; 2009 $ 2,830                                                                                                 |  |               | 223,507 |   |                   |   | 216,600 |  
|Premises and equipment, net                                                                                                                                         |  |               | 5,989   |   |                   |   | 6,175   |  
|Restricted investment in bank stocks                                                                                                                                |  |               | 2,661   |   |                   |   | 2,661   |  
|Investment in life insurance                                                                                                                                        |  |               | 5,196   |   |                   |   | 5,109   |  
|Other assets                                                                                                                                                        |  |               | 4,769   |   |                   |   | 4,621   |  
|                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|                                                                                                                                                                    |  |              
|TOTAL ASSETS                                                                                                                                                        |  | $             | 363,079 |   |                   | $ | 355,836 |  
|                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|                                                                                                                                                                    |  |              
|LIABILITIES                                                                                                                                                         |  |               |         |   |                   |   |         |  
|Deposits:                                                                                                                                                           |  |               |         |   |                   |   |         |  
|Non-interest bearing                                                                                                                                                |  | $             | 27,662  |   |                   | $ | 27,952  |  
|Interest bearing                                                                                                                                                    |  |               | 278,734 |   |                   |   | 268,507 |  
|                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|Total deposits                                                                                                                                                      |  |               | 306,396 |   |                   |   | 296,459 |  
|Short-term borrowings                                                                                                                                               |  |               | 3,985   |   |                   |   | 4,512   |  
|Long-term borrowings                                                                                                                                                |  |               | 18,000  |   |                   |   | 22,000  |  
|Junior subordinated debt                                                                                                                                            |  |               | 5,155   |   |                   |   | 5,155   |  
|Other liabilities                                                                                                                                                   |  |               | 2,805   |   |                   |   | 2,352   |  
|                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|                                                                                                                                                                    |  |              
|TOTAL LIABILITIES                                                                                                                                                   |  |               | 336,341 |   |                   |   | 330,478 |  
|                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|                                                                                                                                                                    |  |              
|SHAREHOLDERS EQUITY                                                                                                                                                |  |               |         |   |                   |   |         |  
|Preferred stock, without par value; 10,000,000 shares authorized and unissued                                                                                       |  |               |        |   |                   |   |        |  
|Common stock, $ 5.00 par value; 10,000,000 shares authorized Shares issued; 2010 -1,405,825; 2009  1,404,348 Shares
outstanding; 2010- 1,402,174; 2009  1,400,697 |  |               | 7,029   |   |                   |   | 7,022   |  
|Capital in excess of par value                                                                                                                                      |  |               | 382     |   |                   |   | 350     |  
|Retained earnings                                                                                                                                                   |  |               | 17,989  |   |                   |   | 16,820  |  
|Treasury stock, at cost 2010  3,651 shares; 2009 3,651 shares                                                                                                     |  |               | (110    | ) |                   |   | (110    | )
|Accumulated other comprehensive income                                                                                                                              |  |               | 1,448   |   |                   |   | 1,276   |  
|                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|TOTAL SHAREHOLDERS EQUITY                                                                                                                                          |  |               | 26,738  |   |                   |   | 25,358  |  
|                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|                                                                                                                                                                    |  |              
|TOTAL LIABILITIES & SHAREHOLDERS EQUITY                                                                                                                            |  | $             | 363,079 |   |                   | $ | 355,836 |  
|                                                                                                                                                                    |  |               |         |   |                   |   |         |  

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 EndedJune 30, |       | Six Months EndedJune 30,
|                                                    |  | 2010                       |       | 2009                     |   | 2010  |  | 2009
|INTEREST INCOME                                     |  |                            |       |                          |   |       |  |      |       |  |   |      
|Interest & fees on loans                            |  | $                          | 3,574 |                          | $ | 3,576 |  | $    | 7,018 |  | $ | 7,155
|Interest on taxable securities                      |  |                            | 648   |                          |   | 755   |  |      | 1,280 |  |   | 1,556
|Interest on tax-exempt securities                   |  |                            | 322   |                          |   | 279   |  |      | 641   |  |   | 529  
|Other interest & dividends                          |  |                            | 11    |                          |   | 14    |  |      | 21    |  |   | 25   
|                                                    |  |                            |       |                          |   |       |  |      |       |  |   |      
|TOTAL INTEREST INCOME                               |  |                            | 4,555 |                          |   | 4,624 |  |      | 8,960 |  |   | 9,265
|                                                    |  |                            |       |                          |   |       |  |      |       |  |   |      
|                                                    |  |                            |       |                         
|INTEREST EXPENSE                                    |  |                            |       |                          |   |       |  |      |       |  |   |      
|Interest on deposits                                |  |                            | 1,468 |                          |   | 1,893 |  |      | 3,087 |  |   | 3,754
|Interest on short term borrowings                   |  |                            | 11    |                          |   | 10    |  |      | 27    |  |   | 26   
|Interest on long term borrowings                    |  |                            | 249   |                          |   | 312   |  |      | 523   |  |   | 625  
|                                                    |  |                            |       |                          |   |       |  |      |       |  |   |      
|TOTAL INTEREST EXPENSE                              |  |                            | 1,728 |                          |   | 2,215 |  |      | 3,637 |  |   | 4,405
|                                                    |  |                            |       |                          |   |       |  |      |       |  |   |      
|                                                    |  |                            |       |                         
|NET INTEREST INCOME                                 |  |                            | 2,827 |                          |   | 2,409 |  |      | 5,323 |  |   | 4,860
|Provision for loan losses                           |  |                            | 94    |                          |   | 22    |  |      | 114   |  |   | 202  
|                                                    |  |                            |       |                          |   |       |  |      |       |  |   |      
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |  |                            | 2,733 |                          |   | 2,387 |  |      | 5,209 |  |   | 4,658
|                                                    |  |                            |       |                          |   |       |  |      |       |  |   |      
|                                                    |  |                            |       |                         
|NON-INTEREST INCOME                                 |  |                            |       |                          |   |       |  |      |       |  |   |      
|Service charges on deposits                         |  |                            | 201   |                          |   | 200   |  |      | 396   |  |   | 390  
|Fiduciary activities                                |  |                            | 108   |                          |   | 142   |  |      | 270   |  |   | 259  
|Earnings on investment in life insurance            |  |                            | 55    |                          |   | 54    |  |      | 111   |  |   | 107  
|ATM card fees                                       |  |                            | 164   |                          |   | 146   |  |      | 309   |  |   | 278  
|Realized gains on sales of securities               |  |                            |      |                          |   |      |  |      | 182   |  |   | 289  
|Other income                                        |  |                            | 83    |                          |   | 124   |  |      | 138   |  |   | 183  
|                                                    |  |                            |       |                          |   |       |  |      |       |  |   |      
|TOTAL OTHER INCOME                                  |  |                            | 611   |                          |   | 666   |  |      | 1,406 |  |   | 1,506
|                                                    |  |                            |       |                          |   |       |  |      |       |  |   |      
|                                                    |  |                            |       |                         
|NON-INTEREST EXPENSES                               |  |                            |       |                          |   |       |  |      |       |  |   |      
|Employee compensation & benefits                    |  |                            | 1,083 |                          |   | 1,071 |  |      | 2,227 |  |   | 2,161
|Net occupancy & equipment                           |  |                            | 295   |                          |   | 302   |  |      | 579   |  |   | 594  
|ATM expense                                         |  |                            | 98    |                          |   | 97    |  |      | 191   |  |   | 191  
|Professional fees                                   |  |                            | 119   |                          |   | 93    |  |      | 230   |  |   | 228  
|Director & advisory boards compensation             |  |                            | 86    |                          |   | 87    |  |      | 194   |  |   | 149  
|Supplies & postage                                  |  |                            | 82    |                          |   | 72    |  |      | 158   |  |   | 157  
|FDIC and OCC assessments                            |  |                            | 137   |                          |   | 285   |  |      | 276   |  |   | 391  
|Other non-interest expenses                         |  |                            | 377   |                          |   | 288   |  |      | 694   |  |   | 572  
|                                                    |  |                            |       |                          |   |       |  |      |       |  |   |      
|TOTAL NON-INTEREST EXPENSES                         |  |                            | 2,277 |                          |   | 2,295 |  |      | 4,549 |  |   | 4,443
|                                                    |  |                            |       |                          |   |       |  |      |       |  |   |      
|                                                    |  |                            |       |                         
|Income before income taxes                          |  |                            | 1,067 |                          |   | 758   |  |      | 2,066 |  |   | 1,721
|Income tax expense                                  |  |                            | 227   |                          |   | 143   |  |      | 434   |  |   | 365  
|                                                    |  |                            |       |                          |   |       |  |      |       |  |   |      
|NET INCOME                                          |  | $                          | 840   |                          | $ | 615   |  | $    | 1,632 |  | $ | 1,356
|                                                    |  |                            |       |                          |   |       |  |      |       |  |   |      
|                                                    |  |                            |       |                         
|Basic earnings per share                            |  | $                          | 0.60  |                          | $ | 0.44  |  | $    | 1.16  |  | $ | 0.97 
|                                                    |  |                            |       |                          |   |       |  |      |       |  |   |      
|Dividends per share                                 |  | $                          | 0.17  |                          | $ | 0.14  |  | $    | 0.33  |  | $ | 0.28 
|                                                    |  |                            |       |                          |   |       |  |      |       |  |   |      

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 Six Months Ended June 30, 2010 and 2009

(Unaudited)

(Dollars In Thousands, Except Per Share Data)



|                                                                                                                    |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|------------------------------------------------------------------------------------------------------------------- |  | ----------- | ----- | ---------------------------- | - | ---------------- |  | - | ------------- | - |  | ----------------------------------- | ---- | ----- |  | - | ----- |  | - | ------ | -
|                                                                                                                    |  | CommonStock |       | CapitalIn 
ExcessofPar Value |   | RetainedEarnings |  |   | TreasuryStock |   |  | AccumulatedOtherComprehensiveIncome |      | Total | 
|Balance - January 1, 2009                                                                                           |  | $           | 7,010 |                              | $ | 293              |  | $ | 15,406        |   |  | $                                   | (62  | )     |  | $ | 766   |  | $ | 23,413 |  
|                                                                                                                    |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|                                                                                                                    |  |             |       |                              |   |                 
|Comprehensive income:                                                                                               |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|Net income                                                                                                          |  |             |       |                              |   |                  |  |   | 1,356         |   |  |                                     |      |       |  |   |       |  |   | 1,356  |  
|Change in net unrealized losses on securities available for sale, net of deferred income taxes                      |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   | 267   |  |   | 267    |  
|                                                                                                                    |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|Total comprehensive income                                                                                          |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   | 1,623  |  
|                                                                                                                    |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|                                                                                                                    |  |             |       |                              |   |                 
|Issuance of stock in connection with Dividend reinvestment plan - 1,101 shares                                      |  |             | 5     |                              |   | 28               |  |   |               |   |  |                                     |      |       |  |   |       |  |   | 33     |  
|                                                                                                                    |  |             |       |                              |   |                 
|Treasury stock acquired-1,601shares                                                                                 |  |             |       |                              |   |                  |  |   |               |   |  |                                     | (48  | )     |  |   |       |  |   | (48    | )
|                                                                                                                    |  |             |       |                              |   |                 
|Cash dividends, $0.28 per share                                                                                     |  |             |       |                              |   |                  |  |   | (391          | ) |  |                                     |      |       |  |   |       |  |   | (391   | )
|                                                                                                                    |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|                                                                                                                    |  |             |       |                              |   |                 
|Balance, June 30, 2009                                                                                              |  | $           | 7,015 |                              | $ | 321              |  | $ | 16,371        |   |  | $                                   | (110 | )     |  | $ | 1,033 |  | $ | 24,630 |  
|                                                                                                                    |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|                                                                                                                    |  |             |       |                              |   |                 
|Balance - January 1, 2010                                                                                           |  | $           | 7,022 |                              | $ | 350              |  | $ | 16,820        |   |  | $                                   | (110 | )     |  | $ | 1,276 |  | $ | 25,358 |  
|                                                                                                                    |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|                                                                                                                    |  |             |       |                              |   |                 
|Comprehensive income:                                                                                               |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|Net income                                                                                                          |  |             |       |                              |   |                  |  |   | 1,632         |   |  |                                     |      |       |  |   |       |  |   | 1,632  |  
|Change in net unrealized gains on securities available for sale, net of deferred income taxes and
reclassifications |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   | 172   |  |   | 172    |  
|                                                                                                                    |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|Total comprehensive income                                                                                          |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   | 1,804  |  
|                                                                                                                    |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|                                                                                                                    |  |             |       |                              |   |                 
|Issuance of stock in connection with dividend reinvestment plan - 1,477 shares                                      |  |             | 7     |                              |   | 32               |  |   |               |   |  |                                     |      |       |  |   |       |  |   | 39     |  
|                                                                                                                    |  |             |       |                              |   |                 
|Cash dividends, $0.33 per share                                                                                     |  |             |       |                              |   |                  |  |   | (463          | ) |  |                                     |      |       |  |   |       |  |   | (463   | )
|                                                                                                                    |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  
|                                                                                                                    |  |             |       |                              |   |                 
|Balance, June 30, 2010                                                                                              |  | $           | 7,029 |                              | $ | 382              |  | $ | 17,989        |   |  | $                                   | (110 | )     |  | $ | 1,448 |  | $ | 26,738 |  
|                                                                                                                    |  |             |       |                              |   |                  |  |   |               |   |  |                                     |      |       |  |   |       |  |   |        |  

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)



|                                                                                  |  |                          |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Six Months
EndedJune 30, |        
|                                                                                  |  | 2010                     |         |   | 2009 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |                          |         |   |      |   |         |  
|Net income                                                                        |  | $                        | 1,632   |   |      | $ | 1,356   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                          |         |   |      |   |         |  
|Provision for loan losses                                                         |  |                          | 114     |   |      |   | 202     |  
|Depreciation and amortization                                                     |  |                          | 251     |   |      |   | 273     |  
|Net accretion of securities premium                                               |  |                          | 166     |   |      |   | (146    | )
|Other-than temporary impairment charge                                            |  |                          |        |   |      |   | 15      |  
|Net realized gains on sales of securities                                         |  |                          | (182    | ) |      |   | (289    | )
|Earnings on life insurance                                                        |  |                          | (111    | ) |      |   | (107    | )
|Increase in other assets                                                          |  |                          | (188    | ) |      |   | (918    | )
|Increase (decrease) in other liabilities                                          |  |                          | 453     |   |      |   | (189    | )
|                                                                                  |  |                          |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                          | 2,135   |   |      |   | 197     |  
|                                                                                  |  |                          |         |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |                          |         |   |      |   |         |  
|Securities held to maturity:                                                      |  |                          |         |   |      |   |         |  
|Maturities, calls and principal repayments                                        |  |                          | 1,916   |   |      |   | 1,790   |  
|Purchases                                                                         |  |                          | (721    | ) |      |   | (4,722  | )
|Securities available for sale:                                                    |  |                          |         |   |      |   |         |  
|Maturities, calls and principal repayments                                        |  |                          | 17,202  |   |      |   | 9,048   |  
|Purchases                                                                         |  |                          | (18,786 | ) |      |   | (16,591 | )
|Proceeds from sales                                                               |  |                          | 3,614   |   |      |   | 5,364   |  
|Net increase in loans receivable                                                  |  |                          | (7,045  | ) |      |   | (2,775  | )
|Net increase in restricted investment in bank stocks                              |  |                          |        |   |      |   |        |  
|Purchases of premises and equipment                                               |  |                          | (65     | ) |      |   | (246    | )
|Net maturities of interest bearing time deposits                                  |  |                          | 99      |   |      |   |        |  
|                                                                                  |  |                          |         |   |      |   |         |  
|Net cash used in investing activities                                             |  |                          | (3,786  | ) |      |   | (8,132  | )
|                                                                                  |  |                          |         |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |                          |         |   |      |   |         |  
|Net decrease in non-interest bearing demand and savings deposits                  |  |                          | (290    | ) |      |   | (1,470  | )
|Net increase in time deposits                                                     |  |                          | 10,227  |   |      |   | 25,166  |  
|Net decrease in short-term borrowings                                             |  |                          | (527    | ) |      |   | (6,784  | )
|Proceeds from long-term borrowings                                                |  |                          |        |   |      |   |        |  
|Repayment of long-term borrowings                                                 |  |                          | (4,000  | ) |      |   |        |  
|Proceeds from issuance of common stock                                            |  |                          | 39      |   |      |   | 33      |  
|Acquisition of treasury stock                                                     |  |                          |        |   |      |   | (48     | )
|Dividends paid                                                                    |  |                          | (463    | ) |      |   | (391    | )
|                                                                                  |  |                          |         |   |      |   |         |  
|Net cash provided by financing activities                                         |  |                          | 4,986   |   |      |   | 16,506  |  
|                                                                                  |  |                          |         |   |      |   |         |  
|Net increase in cash and cash equivalents                                         |  |                          | 3,335   |   |      |   | 8,571   |  
|Cash and cash equivalents:                                                        |  |                          |         |   |      |   |         |  
|Beginning of year                                                                 |  |                          | 8,633   |   |      |   | 6,864   |  
|                                                                                  |  |                          |         |   |      |   |         |  
|End of period                                                                     |  | $                        | 11,968  |   |      | $ | 15,435  |  
|                                                                                  |  |                          |         |   |      |   |         |  
|SUPPLEMENTAL DISCLOSURES:                                                         |  |                          |         |   |      |   |         |  
|Cash payments for interest                                                        |  | $                        | 3,724   |   |      | $ | 4,495   |  
|                                                                                  |  |                          |         |   |      |   |         |  
|Cash payments for income taxes                                                    |  | $                        | 324     |   |      | $ | 522     |  
|                                                                                  |  |                          |         |   |      |   |         |  
|NON CASH INVESTING:                                                               |  |                          |         |   |      |   |         |  
|Transfer of loans to foreclosed real estate                                       |  | $                        | 24      |   |      | $ | 122     |  
|                                                                                  |  |                          |         |   |      |   |         |  

See accompanying notes.



5



---

PART I  FINANCIAL INFORMATION, CONTINUED



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





FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2010

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 United States generally accepted accounting principles for interim financial information and are presented in accordance with the instructions to Form 10-Q and Rule 10-01 of the Securities and Exchange
Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2010, are not necessarily indicative of the results that may be expected for the year ending
December 31, 2010.

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, 2009, included in the Corporations Form 10-K filed with the Securities and Exchange Commission on March 15, 2010.

The Corporation has evaluated events and transactions occurring subsequent to the balance sheet date of June 30, 2010, for items that should
potentially be recognized or disclosed in these financial statements. The evaluation was conducted through August 12, 2010, the date these financial statements were issued.

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



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



Note C  Comprehensive Income (Loss)

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



|                                                                |  |                            |      |   |                          |   |     |      |  |   |      |   |  |   |      |  
|--------------------------------------------------------------- |  | -------------------------- | ---- | - | ------------------------ | - | --- | ---- |  | - | ---- | - |  | - | ---- | -
|                                                                |  | Three Months EndedJune
30, |      |   | Six Months EndedJune 30, |  
|                                                                |  | 2010                       |      |   | 2009                     |   |     | 2010 |  |   | 2009 |  
|                                                                |  | (Dollars in Thousands)     |     
|                                                                |  |                            |      |  
|Unrealized holding gains arising during the period              |  | $                          | 491  |   |                          | $ | 72  |      |  | $ | 442  |   |  | $ | 679  |  
|Reclassification of gains realized in net income                |  |                            |     |   |                          |   |    |      |  |   | (182 | ) |  |   | (289 | )
|Other than temporary impairment charge recognized in net income |  |                            |     |   |                          |   | 15  |      |  |   |     |   |  |   | 15   |  
|                                                                |  |                            |      |   |                          |   |     |      |  |   |      |   |  |   |      |  
|                                                                |  |                            | 491  |   |                          |   | 87  |      |  |   | 260  |   |  |   | 405  |  
|Income tax effect                                               |  |                            | (167 | ) |                          |   | (33 | )    |  |   | (88  | ) |  |   | (138 | )
|                                                                |  |                            |      |   |                          |   |     |      |  |   |      |   |  |   |      |  
|Change in accumulated other comprehensive income                |  | $                          | 324  |   |                          | $ | 54  |      |  | $ | 172  |   |  | $ | 267  |  
|                                                                |  |                            |      |   |                          |   |     |      |  |   |      |   |  |   |      |  

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 1,401,104 for the six months ended June 30, 2010 and 1,401,460 for the three months ended June 30, 2010. The weighted average number of shares outstanding was
1,399,181 for the six months ended June 30, 2009 and 1,398,836 for the three months ended June 30, 2009.

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 $175,000 of standby letters of credit as of June 30, 2010. Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the
potential amount of future payment required under the corresponding guarantees. The current amount of the liability as of June 30, 2010 for guarantees under standby letters of credit issued is not material.



7



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



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.

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



8



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



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 June 30, 2010 and December 31,
2009 were as follows:



|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|------------------------------ |  | -------------- | ------ | -------------------- | - | --------------------- |  | - | --------- | - |  | - | ------
|                               |  | AmortizedCost  |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | FairValue
|                               |  | (In Thousands)
|                               |  |                |        |                     
|SECURITIES AVAILABLE FOR SALE: |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|June 30, 2010:                 |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|U.S. agency securities         |  | $              | 14,443 |                      | $ | 186                   |  | $ | (1        | ) |  | $ | 14,628
|Mortgage-backed securities     |  |                | 62,127 |                      |   | 1,775                 |  |   | (46       | ) |  |   | 63,856
|Equity securities              |  |                | 661    |                      |   | 308                   |  |   |          |   |  |   | 969   
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  |                |        |                     
|                               |  | $              | 77,231 |                      | $ | 2,269                 |  | $ | (47       | ) |  | $ | 79,453
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  |                |        |                     
|December 31, 2009:             |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|U.S. agency securities         |  | $              | 12,195 |                      | $ | 74                    |  | $ | (38       | ) |  | $ | 12,231
|Mortgage-backed securities     |  |                | 66,619 |                      |   | 1,687                 |  |   | (72       | ) |  |   | 68,234
|Equity securities              |  |                | 661    |                      |   | 311                   |  |   |          |   |  |   | 972   
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  |                |        |                     
|                               |  | $              | 79,475 |                      | $ | 2,072                 |  | $ | (110      | ) |  | $ | 81,437
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  |                |        |                     
|                               |  | AmortizedCost  |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | FairValue
|                               |  | (In Thousands)
|                               |  |                |        |                     
|SECURITIES HELD TO MATURITY:   |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|June 30, 2010:                 |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|U.S. agency securities         |  | $              | 250    |                      | $ | 5                     |  | $ |          |   |  | $ | 255   
|State and municipal securities |  |                | 28,989 |                      |   | 498                   |  |   | (781      | ) |  |   | 28,706
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  |                |        |                     
|                               |  | $              | 29,239 |                      | $ | 503                   |  | $ | (781      | ) |  | $ | 28,961
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  |                |        |                     
|December 31, 2009:             |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|U.S. agency securities         |  | $              | 250    |                      | $ | 11                    |  | $ |          |   |  | $ | 261   
|State and municipal securities |  |                | 29,954 |                      |   | 374                   |  |   | (874      | ) |  |   | 29,454
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  |                |        |                     
|                               |  | $              | 30,204 |                      | $ | 385                   |  | $ | (874      | ) |  | $ | 29,715
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       



9



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



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 June 30, 2010 and December 31, 2009:



|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|------------------------------ |  | ------------------- | ------ | ----------------- | - | --------- |  | ---------------- | ----- | --------- | - | ---------------- |  | - | ------ |  | - | ---
|                               |  | Less than 12 Months |        | 12 Months or More |   | Total    
|                               |  | FairValue           |        | UnrealizedLosses  |   | FairValue |  | UnrealizedLosses |       | FairValue |   | UnrealizedLosses
|June 30, 2010                  |  | (In Thousands)     
|                               |  |                     |        |                   |   |          
|SECURITIES AVAILABLE FOR SALE: |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|U. S agency securities         |  | $                   | 2,773  |                   | $ | 1         |  | $                |      |           | $ |                 |  | $ | 2,773  |  | $ | 1  
|Mortgage-backed securities     |  |                     | 8,171  |                   |   | 46        |  |                  |      |           |   |                 |  |   | 8,171  |  |   | 46 
|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|                               |  |                     |        |                   |   |          
|                               |  |                     | 10,944 |                   |   | 47        |  |                  |      |           |   |                 |  |   | 10,944 |  |   | 47 
|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|                               |  |                     |        |                   |   |          
|SECURITIES HELD TO MATURITY:   |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|State and municipal securities |  |                     | 3,730  |                   |   | 55        |  |                  | 4,969 |           |   | 726              |  |   | 8,699  |  |   | 781
|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|                               |  |                     |        |                   |   |          
|Total                          |  | $                   | 14,674 |                   | $ | 102       |  | $                | 4,969 |           | $ | 726              |  | $ | 19,643 |  | $ | 828
|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|                               |  |                     |       
|                               |  | Less than 12 Months |        | 12 Months or More |   | Total    
|                               |  | FairValue           |        | UnrealizedLosses  |   | FairValue |  | UnrealizedLosses |       | FairValue |   | UnrealizedLosses
|December 31, 2009              |  | (In Thousands)     
|                               |  |                     |        |                   |   |          
|SECURITIES AVAILABLE FOR SALE: |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|Mortgage-backed securities     |  | $                   | 7,797  |                   | $ | 71        |  | $                | 215   |           | $ | 1                |  | $ | 8,012  |  | $ | 72 
|U. S. agency securities        |  |                     | 4,872  |                   |   | 38        |  |                  |      |           |   |                 |  |   | 4,872  |  |   | 38 
|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|                               |  |                     |        |                   |   |          
|                               |  |                     | 12,669 |                   |   | 109       |  |                  | 215   |           |   | 1                |  |   | 12,884 |  |   | 110
|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|                               |  |                     |        |                   |   |          
|SECURITIES HELD TO MATURITY:   |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|State and municipal securities |  |                     | 7,479  |                   |   | 119       |  |                  | 4,648 |           |   | 755              |  |   | 12,127 |  |   | 874
|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    
|                               |  |                     |        |                   |   |          
|Total                          |  | $                   | 20,148 |                   | $ | 228       |  | $                | 4,863 |           | $ | 756              |  | $ | 25,011 |  | $ | 984
|                               |  |                     |        |                   |   |           |  |                  |       |           |   |                  |  |   |        |  |   |    

At June 30, 2010, two U. S. agency securities have unrealized
losses. The aggregate depreciation from the Corporations amortized cost basis on these securities is 0.04%. In managements opinion, these unrealized losses relate to changes in interest rates.

At June 30, 2010, five mortgage-backed securities have unrealized losses. The aggregate depreciation from the Corporations amortized cost
basis on these securities is 0.6%. 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.



10



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



At June 30, 2010, thirty-seven state and municipal securities have unrealized losses with aggregate
depreciation of 8.2% 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.

Gross realized gains and losses for the six
months ending June 30, 2010 were as follows:



|                           |  |                    |     |                     |   |                   |  |   |    
|-------------------------- |  | ------------------ | --- | ------------------- | - | ----------------- |  | - | ---
|                           |  | GrossRealizedGains |     | GrossRealizedLosses |   | Net Gains(Losses)
|                           |  |                    |    
|June 30, 2010:             |  |                    |     |                     |   |                   |  |   |    
|Mortgage-backed securities |  | $                  | 182 |                     | $ |                  |  | $ | 182
|                           |  | $                  | 182 |                     | $ |                  |  | $ | 182
|                           |  |                    |     |                     |   |                   |  |   |    

Amortized cost and fair value at June 30, 2010 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                |  | $                  | 3,484  |                  | $ | 3,515         |  | $         | 1,728  |  | $ | 1,749 
|Over 1 year through 5 years   |  |                    | 9,158  |                  |   | 9,286         |  |           | 2,487  |  |   | 2,491 
|Over 5 years through 10 years |  |                    | 1,801  |                  |   | 1,827         |  |           | 12,680 |  |   | 12,861
|Over 10 years                 |  |                    |       |                  |   |              |  |           | 12,344 |  |   | 11,860
|Mortgage-backed securities    |  |                    | 62,127 |                  |   | 63,856        |  |           |       |  |   |      
|Equity securities             |  |                    | 661    |                  |   | 969           |  |           |       |  |   |      
|                              |  |                    |        |                  |   |               |  |           |        |  |   |       
|                              |  |                    |        |                 
|                              |  | $                  | 77,231 |                  | $ | 79,453        |  | $         | 29,239 |  | $ | 28,961
|                              |  |                    |        |                  |   |               |  |           |        |  |   |       

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



11



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



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.

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.



12



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



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

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

An asset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.

The following describes the valuation techniques used by the Corporation to measure certain financial assets and liabilities
recorded at fair value on a recurring basis in the financial statements:

Securities available for sale: Securities available for sale are
recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of
identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar
securities by using pricing models that consider observable market data (Level 2). For certain securities which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or
transferability, and such adjustments are generally based on available market evidence (Level 3).



13



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



For financial assets measured at fair value on a recurring basis, the fair value measurements by level
within the fair value hierarchy used at June 30, 2010 and December 31, 2009 are as follows (in thousands):



|                              |  |                  |        |                                                            |   |                                           |  |                                        |        |  |   |    
|----------------------------- |  | ---------------- | ------ | ---------------------------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | ------ |  | - | ---
|Description                   |  | June 30,2010     |        | (Level
1)Quoted Prices inActive Marketsfor IdenticalAssets |   | (Level
2)SignificantOtherObservableInputs |  | (Level
3)SignificantUnobservableInputs
|                              |  |                  |        |                                                           
|Securities available for sale |  | $                | 79,453 |                                                            | $ | 461                                       |  | $                                      | 78,484 |  | $ | 508
|                              |  |                  |        |                                                           
|Description                   |  | December 31,2009 |        | (Level
1)Quoted Prices inActive Marketsfor IdenticalAssets |   | (Level
2)SignificantOtherObservableInputs |  | (Level
3)SignificantUnobservableInputs
|                              |  |                  |        |                                                           
|Securities available for sale |  | $                | 81,437 |                                                            | $ | 464                                       |  | $                                      | 80,465 |  | $ | 508

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 June 30, 2010 and December 31,
2009.



|                                                    |  |      |     |      |   |     |  
|--------------------------------------------------- |  | ---- | --- | ---- | - | --- | -
|                                                    |  | 2010 |     | 2009 |  
|                                                    |  |     
|Fair Value, beginning of period                     |  | $    | 508 |      | $ | 425 |  
|Total losses included in other comprehensive income |  |      |    |      |   | (87 | )
|Purchases                                           |  |      |    |      |   | 170 |  
|                                                    |  |      |     |      |   |     |  
|Fair Value, end of period                           |  | $    | 508 |      | $ | 508 |  
|                                                    |  |      |     |      |   |     |  

The following describes the valuation techniques used by the Corporation to measure certain financial assets recorded at
fair value on a nonrecurring basis in the financial statements:

Impaired Loans: Loans are designated as impaired when, in the judgment of
management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. The measurement of loss associated with impaired loans can be based on



14



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FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



either the observable market price of the loan or the fair value of the collateral. Fair value is measured based on the value of the collateral securing the loans. Collateral may be in the form
of real estate or business assets including equipment, inventory, and accounts receivable. The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed
appraiser outside of the Corporation using observable market data (Level 2). However, if the collateral is a house or building in the process of construction or if an appraisal of the real estate property is over two years old, then the fair value
is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business financial statements if not considered significant using observable market data.
Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Impaired loans allocated to the Allowance for Loan Losses are measured at fair value on a nonrecurring basis.
Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.

Certain
assets such as real estate owned are measured at fair value less the cost to sell. Management believes that the fair value component in its valuation follows the provisions of ASC 820.

Assets measured at fair value on a non-recurring basis at June 30, 2010 and December 31, 2009 are summarized below:



|                       |  |                  |       |                                                            |   |                                           |  |                                        |   |  |   |      
|---------------------- |  | ---------------- | ----- | ---------------------------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | - |  | - | -----
|Description            |  | June 30,2010     |       | (Level
1)Quoted Prices inActive Marketsfor IdenticalAssets |   | (Level
2)SignificantOtherObservableInputs |  | (Level
3)SignificantUnobservableInputs
|                       |  |                  |       |                                                           
|Impaired loans         |  | $                | 86    |                                                            | $ |                                          |  | $                                      |  |  | $ | 86   
|Foreclosed real estate |  |                  | 24    |                                                            |   |                                          |  |                                        |  |  |   | 24   
|                       |  |                  |       |                                                           
|Description            |  | December 31,2009 |       | (Level 1)Quoted Prices inActive
Marketsfor IdenticalAssets |   | (Level
2)SignificantOtherObservableInputs |  | (Level
3)SignificantUnobservableInputs
|                       |  |                  |       |                                                           
|Impaired loans         |  | $                | 1,394 |                                                            | $ |                                          |  | $                                      |  |  | $ | 1,394
|Foreclosed real estate |  |                  | 122   |                                                            |   |                                          |  |                                        |  |  |   | 122  

Total impaired loans, which are
measured for impairment using the fair value of the collateral for collateral-dependent loans, had a carrying amount of $100,000 and $2,410,000, net of the valuation



15



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FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



allowances of $14,000 and $1,016,000 as of June 30, 2010 and December 31, 2009, respectively. This resulted in additional provision for loan losses of $0 for the period ending
June 30, 2010 and $1,000,000 for the period ending December 31, 2009.

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 June 30, 2010 and December 31, 2009.

Cash and cash equivalents:

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

Time certificates of deposit:

The carrying amount of time certificates of deposit approximate their fair value.

Securities:

For
securities and marketable equity securities held for investment purposes, fair values are based on quoted market prices or dealer quotes. For other securities held as investments, fair value equals quoted market price, if available. If a quoted
market price is not available, fair values are based on quoted market prices for similar securities. For securities which are not traded in active markets or are subject to transfer restrictions, valuations are generally based on available market
evidence.

Loans receivable:

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. Fair values for nonperforming loans are estimated
using discounted cash flow analyses or underlying collateral values, where applicable.



16



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FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



Restricted investment in bank stock:

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

Accrued interest receivable and payable:

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

Deposit liabilities:

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:

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

Long-term debt:

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:

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:

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



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FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



The estimated fair values of the Corporations financial instruments were as follows at
June 30, 2010 and December 31, 2009.



|                                        |  |                |         |           |   |                |  |           |         |  |   |        
|--------------------------------------- |  | -------------- | ------- | --------- | - | -------------- |  | --------- | ------- |  | - | -------
|                                        |  | 2010           |         | 2009     
|                                        |  | CarryingAmount |         | FairValue |   | CarryingAmount |  | FairValue
|                                        |  | (In Thousands)
|Financial assets:                       |  |                |         |           |   |                |  |           |         |  |   |        
|Cash and cash equivalents               |  | $              | 11,968  |           | $ | 11,968         |  | $         | 8,633   |  | $ | 8,633  
|Time certificates of deposit            |  |                | 297     |           |   | 297            |  |           | 396     |  |   | 396    
|Investment securities:                  |  |                |         |           |   |                |  |           |         |  |   |        
|Available for sale                      |  |                | 79,453  |           |   | 79,453         |  |           | 81,437  |  |   | 81,437 
|Held to maturity                        |  |                | 29,239  |           |   | 28,961         |  |           | 30,204  |  |   | 29,715 
|Loans, less allowance for loan losses   |  |                | 223,507 |           |   | 224,265        |  |           | 216,600 |  |   | 217,481
|Accrued interest receivable             |  |                | 1,340   |           |   | 1,340          |  |           | 1,452   |  |   | 1,452  
|Restricted investment in bank stocks    |  |                | 2,661   |           |   | 2,661          |  |           | 2,661   |  |   | 2,661  
|                                        |  |                |         |          
|Financial liabilities:                  |  |                |         |           |   |                |  |           |         |  |   |        
|Deposits                                |  |                | 306,396 |           |   | 311,265        |  |           | 296,459 |  |   | 301,750
|Short-term borrowings                   |  |                | 3,985   |           |   | 3,985          |  |           | 4,512   |  |   | 4,512  
|Long-term debt                          |  |                | 18,000  |           |   | 19,717         |  |           | 22,000  |  |   | 23,519 
|Junior subordinated debt                |  |                | 5,155   |           |   | 5,155          |  |           | 5,155   |  |   | 5,155  
|Accrued interest payable                |  |                | 356     |           |   | 356            |  |           | 443     |  |   | 443    
|                                        |  |                |         |          
|Off-balance sheet financial instruments |  |                |        |           |   |               |  |           |        |  |   |       

Note H  New and
Recently Adopted Accounting Pronouncements

In June 2009, the FASB issued new guidance relating to the accounting for transfers of
financial assets. The new guidance, which was issued as SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment to SFAS No. 140, was adopted into Codification in December 2009 through the issuance of Accounting
Standards Updated (ASU) 2009-16. The new standard provides guidance to improve the relevance, representational faithfulness, and comparability of the information that an entity provides in its financial statements about a transfer of
financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferors continuing involvement, if any, in transferred financial assets. The Corporation will adopt the new guidance in
2010 and is evaluating the impact it will have, if any, on its consolidated financial statements.

In June 2009, the FASB issued new guidance
relating to the variable interest entities. The new guidance, which was issued as SFAS No. 167, Amendments to FASB Interpretation No. 46(R), was adopted into Codification in December 2009. The objective of the guidance is to improve
financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable information to



18



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FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



users of financial statements. SFAS No. 167 is effective as of January 1, 2010. The Corporation does not expect the adoption of the new guidance to have a material impact on its
consolidated financial statements.

In September 2009, the FASB issued new guidance impacting Topic 820. This creates a practical expedient to
measure the fair value of an alternative investment that does not have a readily determinable fair value. This guidance also requires certain additional disclosures. This guidance is effective for interim and annual periods ending after
December 15, 2009. The Corporation does not expect the adoption of the new guidance to have a material impact on its consolidated financial statements.

In October 2009, the FASB issued ASU 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other
Financing. ASU 2009-15 amends Subtopic 470-20 to expand accounting and reporting guidance for own-share lending arrangements issued in contemplation of convertible debt issuance. ASU 2009-15 is effective for fiscal years beginning on or after
December 15, 2009 and interim periods within those fiscal years for arrangements outstanding as of the beginning of those fiscal years. The Corporation does not expect the adoption of ASU 2009-15 to have a material impact on its consolidated
financial statements.

In January 2010, the FASB issued ASU 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with
Components of Stock and Cash  a consensus of the FASB Emerging Issues Task Force. ASU 2010-01 clarifies that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on
the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in EPS prospectively and is not a stock dividend. ASU 2010-01 is effective for interim and annual periods ending on
or after December 15, 2009 and should be applied on a retrospective basis. The Corporation does not expect the adoption of ASU 2010-01 to have a material impact on its consolidated financial statements.

In January 2010, the FASB issued ASU 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary  a
Scope Clarification. ASU 2010-02 amends Subtopic 810-10 to address implementation issues related to changes in ownership provisions including clarifying the scope of the decrease in ownership and additional disclosures. ASU 2010-02 is effective
beginning in the period that an entity adopts Statement 160. If an entity has previously adopted Statement 160, ASU 2010-02 is effective beginning in the first interim or annual reporting period ending on or after December 15, 2009 and should
be applied retrospectively to the first period Statement 160 was adopted. The Corporation does not expect the adoption of ASU 2010-02 to have a material impact on its consolidated financial statements.



19



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FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



In January 2010, the FASB issued ASU 2010-04, Accounting for Various Topics  Technical Corrections
to SEC Paragraphs. ASU 2010-04 makes technical corrections to existing SEC guidance including the following topics: accounting for subsequent investments, termination of an interest rate swap, issuance of financial statementssubsequent events,
use of residential method to value acquired assets other than goodwill, adjustments in assets and liabilities for holding gains and losses, and selections of discount rate used for measuring defined benefit obligation. The Corporation does not
expect the adoption of ASU 2010-04 to have a material impact on its consolidated financial statements.

In January 2010, the FASB issued ASU
2010-05, Compensation  Stock Compensation (Topic 718): Escrowed Share Arrangements and the Presumption of Compensation. ASU 2010-05 updates existing guidance to address the SEC staffs views on overcoming the presumption that for certain
shareholders escrowed share arrangements represent compensation. The Corporation does not expect the adoption of ASU 2010-05 to have a material impact on its consolidated financial statements.

In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value
Measurements. ASU 2010-06 amends Subtopic 820-10 to clarify existing disclosures, require new disclosures, and includes conforming amendments to guidance on employers disclosures about postretirement benefit plan assets. ASU 2010-06 is
effective for interim and annual periods beginning after December 15, 2009, except for disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are
effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The Corporation does not expect the adoption of ASU 2010-06 to have a material impact on its consolidated financial statements.

In February 2010, the FASB issued ASU 2010-08, Technical Corrections to Various Topics. ASU 2010-08 clarifies guidance on embedded
derivatives and hedging. ASU 2010-08 is effective for interim and annual periods beginning after December 15, 2009. The Corporation does not expect the adoption of ASU 2010-08 to have a material impact on its consolidated financial statements.

In July 2010, the FASB issued ASU 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit
Losses. The new disclosure guidance will significantly expand the existing requirements and will lead to greater transparency into a companys exposure to credit losses from lending arrangements. The extensive new disclosures of
information as of the end of a reporting period will become effective for both interim and annual reporting periods ending after December 15, 2010. Specific items regarding activity that occurred before the issuance of the ASU, such



20



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as the allowance rollforward and modification disclosures, will be required for periods beginning after December 15, 2010. The Company is currently assessing the impact that ASU 2010-20 will
have on its consolidated financial statements.



|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) legislative and regulatory changes (including the impact of the recently enacted
Dodd-Frank Wall Street Reform and Consumer Protection Act and related regulations) which may result in increased compliance costs, (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 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 consolidated financial statements included in form 10-K for the year ended December 31, 2009). 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.



21



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

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 if the impairment is due to credit concerns, if the impairment is due to other conditions the losses are recognized through other comprehensive income. In estimating
other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent
and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. No securities were deemed to be other than temporarily impaired as of June 30, 2010.

Financial Condition

Total assets of the Corporation increased $7,243,000 or 2.0% during the first six months of 2010. Net loans increased $6,907,000 or 3.2%, securities
decreased by $2,949,000 or 2.6% and cash and cash equivalents increased $3,335,000 or 38.6% from December 31, 2009 to June 30, 2010.

Total deposits increased by $9,937,000 or 3.4% from December 31, 2009. Short-term borrowings decreased $527,000 or 11.7% and Long-term debt
decreased $4,000,000 or 18.2% during the same time period. The growth in deposits can be attributed to the Corporations continuing business development endeavors as well as depositors search for a safe and stable return in light of the
instability in the financial markets over the past year.

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



22



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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) |      
|                                                                |  | 6/30/2010                                   |       |   | 12/31/2009 |  
|                                                                |  |                                            
|Non-accrual loans                                               |  | $                                           | 1,528 |   |            | $ | 4,254  |  
|Accruing loans 90 days past due                                 |  |                                             |      |   |            |   |       |  
|                                                                |  |                                             |       |   |            |   |        |  
|                                                                |  |                                            
|Total Non-Performing Loans                                      |  |                                             | 1,528 |   |            |   | 4,254  |  
|                                                                |  |                                            
|Foreclosed real estate                                          |  |                                             | 146   |   |            |   | 122    |  
|                                                                |  |                                             |       |   |            |   |        |  
|                                                                |  |                                            
|Total Non-Performing Assets                                     |  | $                                           | 1,674 |   |            | $ | 4,376  |  
|                                                                |  |                                             |       |   |            |   |        |  
|                                                                |  |                                            
|Ratios:                                                         |  |                                             |       |   |            |   |        |  
|Non-performing loans to total loans                             |  |                                             | 0.68  | % |            |   | 1.96   | %
|Non-performing assets to total loans and foreclosed real estate |  |                                             | 0.75  | % |            |   | 2.02   | %
|Non-performing loans to allowance for loan losses               |  |                                             | 76.59 | % |            |   | 150.32 | %

Total non-performing assets at
June 30, 2010 decreased $2,702,000 since December 31, 2009 as a result of the decrease in loans in non-accrual status and the increase in foreclosed real estate. This decrease in non-accrual loans is primarily the result of the
restructuring and partial charge-off of $924,000 of a loan to a manufacturer of inventory closely tied to the construction industry.

Results of Operations

Net income for the six months ending June 30, 2010 was $1,632,000 or $1.16 per share compared to $1,356,000 or $0.97 per share for the same period in
2009. Annualized return on average equity was 12.62% for the first six months of 2010 and 11.38% for the same period in 2009. Annualized return on average assets was 0.92% for the first six months of 2010 and 0.82% for the same period in 2009.



23



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Net income for the quarter ending June 30, 2010 was $840,000 or $0.60 per share compared to $615,000 or
$0.44 per share for the same period in 2009. Annualized return on average equity was 12.87% for the second quarter of 2010 and 10.14% for the same period in 2009. Annualized return on average assets was 0.93% for the second quarter of 2010 and 0.72%
for the same period in 2009.

Net interest income for the first six months of 2010 increased by $463,000 or 9.5% compared to the same period
in 2009. 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 six months of 2010, the net interest margin on a fully tax equivalent (FTE) basis was
3.46% compared to 3.34% for the same period in 2009. 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 drivers of the increase in the net interest margin was the decrease in the cost of funds of 0.63% from 2.83% during the first six months of 2009 to 2.20% during the same period in 2010, which was offset by a
decrease in the yield on earning assets of 0.51% from 6.17% in 2009 to 5.66% in 2010.

Net interest income for the quarter ended June 30,
2010 increased by $418,000 compared to the same period in 2009. Net interest margin for the quarter ended June 30, 2010 was 3.62% compared to 3.25% during the same period in 2009. The decrease in the yield on earning assets from 6.04% for the
three months ending June 30, 2009 to 5.69% for the same period in 2010 was more than offset by the decrease in the cost of funds from 2.79% during 2009 to 2.07% during 2010.

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 provision for loan losses of $114,000 for the first six months of 2010 compared to $202,000 for the same time period in 2009. As a percentage of loans, the allowance for loan losses was 0.88% at June 30, 2010, compared to 1.29% at
year-end 2009 and 0.84% at June 30, 2009. The increase in the allowance for loan losses during 2009 was the recognition, restructuring and partial charge-off in 2010 of $924,000 of a loan to a manufacturer of inventory closely tied to the
construction industry. Impaired loans were $323,000 at June 30, 2010 compared to $2,653,000 at December 31, 2009. Management feels impaired loans are adequately collateralized and loss in excess of valuation allowance is not anticipated.
The Banks evaluation of the adequacy of the allowance for loan losses includes a review of all loans on at least a quarterly basis. For residential mortgage loans and consumer loans, the primary factors used to determine the adequacy of the
allowance are delinquency, collateral value, general economic conditions and, where applicable, individual borrower information that is known to the Bank. For commercial loans and commercial real estate loans, the review includes financial
performance of the borrower, payment history, collateral value, general economic conditions and more specific economic conditions affecting specific industries or business activities of the borrowers within the portfolio agreements. Management
believes the allowance is presently adequate to cover the inherent risks associated with the Corporations loan portfolio.



24



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Non-interest income in the first six months of 2010 decreased by $100,000 or 6.6% compared to the same
period in 2009. Income from fiduciary activities increased by $11,000 due to several estate settlements, and increased activity led to ATM card fees increasing by $31,000. These increases were offset by a decrease in realized gains on sales of
securities of $107,000, and a decrease in other non-interest income of $45,000 during the first six months of 2010 compared to the same period in 2009.

Non-interest income for the quarter ending June 30, 2010 was $611,000 compared to $666,000 in 2009. This decrease is primarily related to the
decrease in income from fiduciary activities of $34,000, a decrease in other non-interest income of $41,000, offset by an increase in ATM card fees of $18,000.

Total non-interest expense increased in the first six months of 2010 by $106,000 compared to the first six months of 2009. Employee compensation and
benefits increased $66,000 in the first 6 months of 2010 compared to 2009. 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
expense decreased $115,000. The decrease in FDIC/OCC expense is because there was no special FDIC assessment in 2010 as there was in 2009. Director and advisory board compensation increased $45,000 and other operating expenses increased $122,000. 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.

During the quarter ending June 30, 2010, total non-interest
expense decreased $18,000 compared to the second quarter of 2009. The primary reason for this decrease was the decrease in FDIC/OCC expense of $148,000 offset by increases in professional fees of $26,000 and an increase in other operating expenses
of $89,000. As stated above, the decrease in FDIC/OCC expense is because there was no special FDIC assessment in 2010 as there was in 2009.

Income tax expense was $434,000 for the six month time period ending June 30, 2010 compared to $365,000 for the same time period in 2009. Income tax
expense as a percentage of income before income taxes was 21.0% for the period compared to 21.2% for 2009. The reason for the decrease in the effective tax rate is tax-exempt income as a percentage of income before taxes was higher in 2010 than
2009. 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.



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Income tax expense was $227,000 for the three month time period ending June 30, 2010 compared to
$143,000 for the same time period in 2009. Income tax expense as a percentage of income before income taxes was 21.3% for the period compared to 18.9% for 2009. The reason for the increase in the effective tax rate is tax-exempt income as a
percentage of income before taxes was lower during the quarter in 2010 than 2009.

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 $306,396,000 in deposits at June 30, 2010, which increased
$9,937,000 over total deposits of $296,459,000 at year-end 2009. Other sources of liquidity at June 30, 2010 are available from the following: (1) investments in interest-bearing deposits with banks and federal funds sold, which totaled
$4,492,000, (2) securities maturing in one year or less, which totaled $5,243,000, 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

Total shareholders equity was $26,738,000 as of June 30, 2010, representing a $1,380,000 increase from December 31, 2009. The growth in
capital was a result of net earnings retention of $1,169,000, an increase in accumulated other comprehensive income of $172,000 and an increase in common stock and surplus of $39,000 as a result of the Corporations dividend reinvestment plan.
The increase in other comprehensive income is due to the increase in value of the Corporations available for sale securities.

At
June 30, 2010, the Bank had a Tier I leverage ratio of 8.21%, a Tier I capital to risk-based assets ratio of 15.46% and a total capital to risk-based assets ratio of 16.58%. 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.



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|Item 3. | Quantitative and Qualitative Disclosures 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 June 30, 2010. 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 June 30, 2010, 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
|------- | -----------------

There are no pending
or threatened legal proceedings to which the Corporation or its subsidiaries is a party or to which the property of either the Corporation or its subsidiaries is subject to that, in the opinion of management, may materially impact the financial
condition of either the Corporation or its subsidiaries.



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



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| | (b) | The table below sets forth the information with respect to purchases made by or on behalf of First Community Financial Corporation or any affiliated purchaser as
defined in Rule 240-10b-18(a) (3) under Regulation S-K of common stock during the quarter ended June 30, 2010.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                         |  |                               |  |                           |      |                                                                              |   |                                                                             |       
|------------------------ |  | ----------------------------- |  | ------------------------- | ---- | ---------------------------------------------------------------------------- | - | --------------------------------------------------------------------------- | ------
|                         |  | 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
|                         |  |                               |  |                          
|April 1 through April 30 |  | 0                             |  | $                         | 0.00 |                                                                              | 0 |                                                                             | 96,349
|                         |  |                               |  |                          
|May 1 through May 31     |  | 0                             |  | $                         | 0.00 |                                                                              | 0 |                                                                             | 96,349
|                         |  |                               |  |                          
|June 1 through June 30   |  | 0                             |  | $                         | 0.00 |                                                                              | 0 |                                                                             | 96,349
|                         |  |                               |  |                           |      |                                                                              |   |                                                                             |       
|                         |  |                               |  |                          
|Total for the period     |  | 0                             |  |                           |      |                                                                              | 0 |                                                                             |       
|                         |  |                               |  |                           |      |                                                                              |   |                                                                             |       

Item 3. Defaults Upon Senior Securities

None



|Item 4. | Removed and Reserved
|------- | --------------------



|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.)



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



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SIGNATURES

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



|      |  |                 |  |  |  |                                       |  |                                           
|----- |  | --------------- |  |  |  | ------------------------------------- |  | ------------------------------------------
|      |  |                 |  |  |  | FIRST COMMUNITY FINANCIAL CORPORATION
|      |  |                 |  |  |  | (Registrant)                         
|      |  |                 |  | 
|Date: |  | August 12, 2010 |  |  |  | BY:                                   |  | /S/    JODY D.
GRAYBILL                   
|      |  |                 |  |  |  |                                       |  | Jody D. Graybill                          
|      |  |                 |  |  |  |                                       |  | President                                 
|      |  |                 |  |  |  |                                       |  | (Principal Executive Officer)             
|      |  |                 |  | 
|Date: |  | August 12, 2010 |  |  |  | BY:                                   |  | /S/    RICHARD R.
LEITZEL                 
|      |  |                 |  |  |  |                                       |  | Richard R. Leitzel                        
|      |  |                 |  |  |  |                                       |  | Vice President and Chief Financial Officer
|      |  |                 |  |  |  |                                       |  | (Principal Financial Officer)             



30