Fedfirst Financial 10-Q 2008 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PERSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedJune 30, 2008

OR

o TRANSITION REPORT PERSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission file number: 0-51153

FEDFIRST FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

United States
(State or other jurisdiction of incorporation or organization) 25-1828028
(I.R.S. Employer Identification No.)

Donner at Sixth Street, Monessen, Pennsylvania	15062
(Address of principal executive offices)	(Zip Code)

(724) 684-6800
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ       Noo

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 filero Accelerated filero Non-accelerated filero
(Do not check if a smaller reporting company) Smaller reporting companyþ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso       Noþ

As of August 5, 2008, the issuer had 6,390,750 shares of common stock outstanding.

FORM 10-Q

INDEX

	Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements		1
Consolidated Statements of Financial Condition at June 30, 2008 (Unaudited) and December 31, 2007		1
Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2008 and 2007		2
Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive (Loss) Income for the Six Months Ended June 30, 2008 and 2007 (Unaudited)		3
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2008 and 2007 (Unaudited)		4
Notes to the Unaudited Consolidated Financial Statements		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3. Quantitative and Qualitative Disclosures About Market Risk		23
Item 4. Controls and Procedures		23
PART II – OTHER INFORMATION
Item 1. Legal Proceedings		24
Item 1A. Risk Factors		24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		24
Item 3. Defaults Upon Senior Securities		24
Item 4. Submission of Matters to a Vote of Security Holders		25
Item 5. Other Information		25
Item 6. Exhibits		25
SIGNATURES
EX-10.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	June 30,			December 31,
	2008			2007
(Dollars in thousands, except share data)	(UNAUDITED)
Assets:
Cash and cash equivalents:
Cash and due from banks	$	1,914		$	2,127
Interest-earning deposits		5,369			3,425
Total cash and cash equivalents		7,283			5,552
Securities available-for-sale		96,245			89,073
Loans, net		207,253			187,954
Federal Home Loan Bank (“FHLB”) stock, at cost		6,017			5,076
Accrued interest receivable — loans		1,011			966
Accrued interest receivable — securities		636			651
Premises and equipment, net		2,846			2,956
Bank-owned life insurance		7,674			7,538
Goodwill		1,080			1,080
Real estate owned		974			1,119
Other assets		564			366
Deferred tax assets		4,071			2,942
Total assets	$	335,654		$	305,273
Liabilities and Stockholders’ Equity:
Deposits:
Noninterest-bearing		11,137			8,918
Interest-bearing		157,420			146,640
Total deposits		168,557			155,558
Borrowings		120,908			101,074
Advance payments by borrowers for taxes and insurance		616			477
Accrued interest payable — deposits		787			1,116
Accrued interest payable — borrowings		485			413
Other liabilities		3,361			2,782
Total liabilities		294,714			261,420
Minority interest in subsidiary		83			80
Stockholders’ equity:
Preferred stock $0.01 par value; 10,000,000 shares authorized; none issued		—			—
Common stock $0.01 par value; 20,000,000 shares authorized; 6,707,500 shares issued and 6,397,075 and 6,518,200 shares outstanding		67			67
Additional paid-in-capital		29,241			29,084
Retained earnings — substantially restricted		18,408			18,520
Accumulated other comprehensive loss, net of deferred taxes of $(1,375) and $(45)		(2,133	)		(70	)
Unearned Employee Stock Ownership Plan (“ESOP”)		(1,987	)		(2,074	)
Common stock held in treasury, at cost (310,425 and 189,300 shares)		(2,739	)		(1,754	)
Total stockholders’ equity		40,857			43,773
Total liabilities and stockholders’ equity	$	335,654		$	305,273

See Notes to the Unaudited Consolidated Financial Statements

1

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	For the Three Months					For the Six Months
	Ended June 30,					Ended June 30,
(Dollars in thousands, except per share data)	2008		2007			2008			2007
Interest income:
Loans	$	2,901	$	2,581		$	5,719		$	5,075
Securities		1,373		969			2,759			1,994
Other interest-earning assets		81		158			183			277
Total interest income		4,355		3,708			8,661			7,346
Interest expense:
Deposits		1,231		1,249			2,539			2,417
Borrowings		1,125		809			2,243			1,765
Total interest expense		2,356		2,058			4,782			4,182
Net interest income		1,999		1,650			3,879			3,164
Provision for loan losses		220		30			279			75
Net interest income after provision for loan losses		1,779		1,620			3,600			3,089
Noninterest income:
Fees and service charges		118		101			220			196
Insurance commissions		393		340			1,113			931
Income from bank-owned life insurance		69		72			136			142
Net gain (loss) on sales of securities		—		(1	)		156			(1,410	)
Loss on sale of real estate owned		—		—			(3	)		—
Other		9		4			12			7
Total noninterest income		589		516			1,634			(134	)
Noninterest expense:
Compensation and employee benefits		1,312		1,356			2,774			2,776
Occupancy		318		278			659			531
FDIC insurance premiums		5		5			11			11
Data processing		105		95			211			185
Other		496		471			935			916
Total noninterest expense		2,236		2,205			4,590			4,419
Minority interest in net income of consolidated subsidiary		13		7			56			38
Income (loss) before income tax expense (benefit)		119		(76	)		588			(1,502	)
Income tax expense (benefit)		54		(18	)		255			(475	)
Net income (loss)	$	65	$	(58	)	$	333		$	(1,027	)
Earnings (loss) per share:
Basic and diluted	$	0.01	$	(0.01	)	$	0.06		$	(0.16	)
Weighted-average shares outstanding:
Basic		5,995,088		6,444,010			5,983,500			6,414,977
Diluted		5,995,088		6,448,038			5,983,500			6,419,483

See Notes to the Unaudited Consolidated Financial Statements

2

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND
COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

									Accumulated						Common
			Additional						Other						Stock			Total
	Common		Paid-in-			Retained			Comprehensive			Unearned			Held in			Stockholders’			Comprehensive
	Stock		Capital			Earnings			Loss			ESOP			Treasury			Equity			Loss
(Dollars in thousands)
Balance at January 1, 2007	$	67	$	28,787		$	20,475		$	(737	)	$	(2,246	)	$	—		$	46,346
Comprehensive income:
Net loss		—		—			(1,027	)		—			—			—			(1,027	)	$	(1,027	)
Transfer of securities to held for trading, net of tax of $(552)		—		—			—			857			—			—			857			857
Unrealized loss on securities available-for-sale, net of tax of $(435)		—		—			—			(675	)		—			—			(675	)		(675	)
Purchase of common stock to stock to be held in treasury (65,300 shares)		—		—			—			—			—			(611	)		(611	)
ESOP shares committed to be released (8,640 shares)		—		(6	)		—			—			86			—			80
Stock-based compensation expense		—		167			—			—			—			—			167
Stock awards forfeited		—		10			—			—			—			(10	)		—
Total comprehensive loss																					$	(845	)
Balance at June 30, 2007	$	67	$	28,958		$	19,448		$	(555	)	$	(2,160	)	$	(621	)	$	45,137

									Accumulated						Common
			Additional						Other						Stock			Total
	Common		Paid-in-			Retained			Comprehensive			Unearned			Held in			Stockholders’			Comprehensive
	Stock		Capital			Earnings			Loss			ESOP			Treasury			Equity			Loss
Balance at January 1, 2008	$	67	$	29,084		$	18,520		$	(70	)	$	(2,074	)	$	(1,754	)	$	43,773
Comprehensive income:
Net income		—		—			333			—			—			—			333		$	333
Unrealized loss on securities available-for-sale, net of tax of $(1,269)		—		—			—			(1,969	)		—			—			(1,969	)		(1,969	)
Reclassification adjustment on sales of securities available-for-sale, net of tax of $60		—		—			—			(94	)		—			—			(94	)		(94	)
Cumulative effect adjustment on benefit plan reserve		—		—			(445	)		—			—			—			(445	)
Purchase of common stock to be held in treasury (121,125 shares)		—		—			—			—			—			(985	)		(985	)
ESOP shares committed to be released (8,640 shares)		—		(16	)		—			—			87			—			71
Stock-based compensation expense		—		173			—			—			—			—			173
Total comprehensive loss																					$	(1,730	)
Balance at June 30, 2008	$	67	$	29,241		$	18,408		$	(2,133	)	$	(1,987	)	$	(2,739	)	$	40,857

See Notes to the Unaudited Consolidated Financial Statements

3

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Period
	Ended June 30,
(Dollars in thousands)	2008			2007
Cash flows from operating activities:
Net income (loss)	$	333		$	(1,027	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Minority interest in net income of consolidated subsidiary		56			38
Provision for loan losses		279			75
Depreciation		248			181
Net (gain) loss on sales of securities		(156	)		1,410
Proceeds from sales of securities held for trading		—			40,483
Proceeds from principal repayments of securities held for trading		—			638
Net loss on sale of real estate owned		3			—
Net amortization of security premiums and loan costs		(53	)		(651	)
Non cash expense for ESOP		71			80
Non cash expense for stock-based compensation		173			167
Increase in bank-owned life insurance		(136	)		(142	)
(Increase) decrease in other assets		(566	)		339
Increase (decrease) in other liabilities		356			(79	)
Net cash provided by operating activities		608			41,512
Cash flows from investing activities:
Net loan originations		(19,921	)		(4,890	)
Proceeds from sale of student loan portfolio		—			12
Proceeds from maturities of and principal repayments of securities available-for-sale		9,213			10,702
Proceeds from sales of securities available-for-sale		8,766			—
Purchases of securities available-for-sale		(28,352	)		(37,330	)
Purchases of premises and equipment		(138	)		(1,095	)
(Increase) decrease in FHLB stock, at cost		(941	)		855
Proceeds from sale of other real estate owned		509			—
Net cash used in investing activities		(30,864	)		(31,746	)
Cash flows from financing activities:
Net increase (decrease) in borrowings		19,834			(19,393	)
Net increase in deposits		12,999			10,562
Increase in advance payments by borrowers for taxes and insurance		139			145
Purchases of common stock held in treasury		(985	)		(611	)
Net cash provided by (used in) financing activities		31,987			(9,297	)
Net increase in cash and cash equivalents		1,731			469
Cash and cash equivalents, beginning of period		5,552			4,499
Cash and cash equivalents, end of period	$	7,283		$	4,968
Supplemental cash flow information:
Cash paid for:
Interest on deposits and borrowings	$	5,039		$	4,310
Income tax expense		31			25
Transfer of securities from available-for-sale to held for trading		—			42,531
Real estate acquired in settlement of loans		360			—

See Notes to the Unaudited Consolidated Financial Statements

4

Notes to the Unaudited Consolidated Financial Statements

Note 1. Basis of Presentation/Nature of Operations

The accompanying unaudited Consolidated Financial Statements include the accounts of FedFirst Financial Corporation, a federally chartered holding company (“FedFirst Financial” or the “Company”), whose wholly owned subsidiaries are First Federal Savings Bank (the “Bank”), a federally chartered stock savings bank, and FedFirst Exchange Corporation (“FFEC”), a subsidiary of the Bank. FFEC has an 80% controlling interest in Exchange Underwriters, Inc. Exchange Underwriters, Inc. is an independent insurance agency that offers property and casualty, commercial liability, surety and other insurance products. The Company is a majority owned subsidiary of FedFirst Financial Mutual Holding Company (“FFMHC”), a federally chartered mutual holding company. FFMHC has virtually no operations and assets other than an investment in the Company, and is not included in these financial statements. All significant intercompany transactions have been eliminated.

We operate as a community-oriented financial institution offering residential, multi-family and commercial mortgages, consumer loans and commercial business loans as well as a variety of deposit products for individuals and businesses from nine locations in southwestern Pennsylvania. We conduct insurance brokerage activities through Exchange Underwriters, Inc. The Bank is subject to competition from other financial institutions and to the regulations of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

The unaudited consolidated financial statements were prepared in accordance with instructions to Form 10-Q and, therefore, do not include information or notes necessary for a complete presentation of financial position, results of operations, changes in stockholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). However, all normal recurring adjustments that, in the opinion of management, are necessary to make the consolidated financial statements not misleading have been included. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, as amended. Certain items previously reported have been reclassified to conform with the current reporting period’s format. The results of operations for the three and six months ended June 30, 2008 are not necessarily indicative of the results that may be expected for the full year or any other interim period.

In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and income and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to determination of the allowance for losses on loans, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, evaluation of securities for other-than-temporary impairment and the valuation of deferred tax assets.

Note 2. Recent Accounting Pronouncements

The Hierarchy of Generally Accepted Accounting Principles.In May 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 162,The Hierarchy of Generally Accepted Accounting Principles.SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. This Statement is effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411,The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.The Company does not anticipate this statement having a material effect on its financial condition or operations upon adoption.

Accounting for Financial Guarantee Insurance Contracts – an interpretation of SFAS No. 60.In May 2008, the FASB issued SFAS No. 163,Accounting for Financial Guarantee Insurance Contracts – an interpretation of SFAS No. 60.This Statement clarifies how SFAS No. 60,Accounting and Reporting by

5

Insurance Enterprises, applies to financial guarantee insurance contracts issued by insurance enterprises, including the recognition and measurement of premium revenue and claim liabilities. It also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years, except for disclosures about the insurance enterprise’s risk-management activities, which are effective the first period (including interim periods) beginning after May 23, 2008. Except for the required disclosures, earlier application is not permitted. The Company does not anticipate this statement having a material effect on its financial condition or operations upon adoption.

Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.In June 2008, the FASB issued FASB Staff Position (“FSP”) Emerging Issues Task Force (“EITF”) 03-6-1,Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.This FSP clarifies that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common shareholders. Awards of this nature are considered participating securities and the two-class method of computing basic and diluted earnings per share must be applied. This FSP is effective for fiscal years beginning after December 15, 2008. The Company does not anticipate this FSP having a material effect on its financial condition or operations upon adoption.

Noncontrolling Interests in Consolidated Financial Statements – an amendment of Accounting Research Bulletin (“ARB”) No. 51.In December, 2007 the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51. SFAS 160 establishes standards related to the treatment of noncontrolling interests. A noncontrolling interest, sometimes called a minority interest, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. SFAS No. 160 will require noncontrolling interests to be treated as a separate component of equity, not as a liability or other item outside permanent equity. The Statement applies to the accounting for noncontrolling interests and transactions with noncontrolling interest holders in consolidated financial statements. The objective of this Statement is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements. Before this Statement was issued, limited guidance existed for reporting noncontrolling interests. As a result, considerable diversity in practice existed. So-called minority interests were reported in the consolidated statement of financial position as liabilities or in the mezzanine section between liabilities and equity. This statement, which the Company does not anticipate having a material effect on its financial condition or operations upon adoption, is effective for fiscal years and interim periods within those fiscal years beginning on or after December 15, 2008. Earlier application is prohibited.

The Fair Value Option for Financial Assets and Financial Liabilities:In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities. SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing certain entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 expands the use of fair value accounting but does not affect existing standards which require assets and liabilities to be carried at fair value. The Company adopted the standards but did not elect the fair value option for any financial assets or financial liabilities as of January 1, 2008.

Fair Value Measurements:In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This Statement does not require any new fair value measurements, however, for some entities the application of this Statement will change current practice. This statement was adopted on January 1, 2008 and did not have a material effect on the Company’s financial condition or operations.

Effective Date of FASB Statement No. 157:In February 2008, the FASB issued FSP 157-2,Effective Date of FASB Statement No. 157, that permits a one-year deferral in applying the measurement provisions of SFAS 157 to non-financial assets and non-financial liabilities (non-financial items) that are not recognized or disclosed at fair value in an entity’s financial statements on a recurring basis (at least annually). Therefore, if

6

the change in fair value of a non-financial item is not required to be recognized or disclosed in the financial statements on an annual basis or more frequently, the effective date of application of SFAS 157 to that item is deferred until fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. This deferral does not apply, however, to an entity that applied SFAS 157 in interim or annual financial statements prior to the issuance of FSP 157-2. This FSP will not have a material effect on the Company’s financial condition or operations upon adoption.

Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements:In March 2007, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 06-4 stating that for an endorsement split-dollar life insurance arrangement, an employer should recognize a liability for future benefits based on the substantive agreement with the employee. The consensus is effective for fiscal years beginning after December 15, 2007. The Company recognized the effects of applying the consensus on this issue through a $445,000 cumulative-effect adjustment to retained earnings at January 1, 2008.

Note 3. Securities

The following table sets forth the amortized cost and fair value of securities available-for-sale at the dates indicated (dollars in thousands).

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
June 30, 2008	Cost		Gains		Losses		Value
Government-Sponsored Enterprises	$	15,712	$	113	$	161	$	15,664
Mortgage-backed		54,965		111		1,170		53,906
REMICs		25,033		49		1,506		23,576
Corporate debt		3,994		—		944		3,050
Equities		49		—		—		49
Total securities available-for-sale	$	99,753	$	273	$	3,781	$	96,245

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2007	Cost		Gains		Losses		Value
Government-Sponsored Enterprises	$	22,321	$	353	$	—	$	22,674
Mortgage-backed		34,948		242		37		35,153
REMICs		27,875		80		478		27,477
Corporate debt		3,995		—		275		3,720
Equities		49		—		—		49
Total securities available-for-sale	$	89,188	$	675	$	790	$	89,073

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The Company adopted SFAS 157 on January 1, 2008. SFAS 157 establishes a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Financial instruments are categorized based on the following characteristics or inputs to the valuation techniques:

Level 1	–	Quoted prices for identical instruments in active markets.
Level 2	–	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are active, and model derived valuations in which significant inputs or significant drivers are observable in active markets.
Level 3	–	Valuations derived from valuation techniques in which one or more significant inputs or significant drivers are unobservable.

The following tables set forth the fair value hierarchy of securities at June 30, 2008.

(Dollars in thousands)	Significant Other		Significant
	Observable Inputs		Unobservable Inputs
June 30, 2008	(Level 2)		(Level 3)		Total
Securities available-for-sale	$	88,723	$	7,522	$	96,245

	Significant
(Dollars in thousands)	Unobservable Inputs
	(Level 3)
December 31, 2007	$	6,390
Total unrealized losses		(727	)
Paydowns and maturities		(164	)
Net transfers in (out) of level 3		2,023
June 30, 2008	$	7,522
The amount of total unrealized losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains (losses) relating to assets still held at June 30, 2008	$	(727	)

The level 3 securities at June 30, 2008 are comprised of 10 securities: six mortgage-backed securities valued at for $3.8 million, or 50.0% of the total; three corporate debt securities (pooled Trust Preferred insurance corporation obligations) valued at $3.0 million, or 40.5% of the total; and one REMIC private label Alt-A security valued at $717,000, or 9.5% of the total. As noted in the table above, reclassifications of securities are reported as net transfers in (out) of level 3 and are the result of the ability to obtain observable data and pricing.

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The following table presents gross unrealized losses and fair value of securities aggregated by category and length of time that individual securities have been in a continuous loss position at the dates indicated (dollars in thousands).

	Less than 12 months						12 months or more						Total
	Number of		Fair		Unrealized		Number of		Fair		Unrealized		Number of		Fair		Unrealized
June 30, 2008	Securities		Value		Losses		Securities		Value		Losses		Securities		Value		Losses
Government-sponsored enterprises		2	$	3,839	$	161		—	$	—	$	—		2	$	3,839	$	161
Mortgage-backed		52		44,902		1,169		2		17		1		54		44,919		1,170
REMICs:
Private label issuer:
Prime fixed and adjustable rate		5		2,834		164		1		676		108		6		3,510		272
Alt-A fixed rate		10		8,917		942		1		1,360		235		11		10,277		1,177
Government-sponsored enterprises		8		3,651		57		—		—		—		8		3,651		57
Total REMICs		23		15,402		1,163		2		2,036		343		25		17,438		1,506
Corporate debt		—		—		—		3		3,050		944		3		3,050		944
Total securities temporarily impaired		77	$	64,143	$	2,493		7	$	5,103	$	1,288		84	$	69,246	$	3,781

	Less than 12 months						12 months or more								Total
	Number of		Fair		Unrealized		Number of		Fair		Unrealized		Number of		Fair		Unrealized
December 31, 2007	Securities		Value		Losses		Securities		Value		Losses		Securities		Value		Losses
Mortgage-backed		8	$	9,946	$	35		3	$	119	$	2		11	$	10,065	$	37
REMICs:
Private label issuer:
Prime fixed and adjustable rate		2		778		2		2		1,028		16		4		1,806		18
Alt-A fixed rate		7		8,390		380		1		766		57		8		9,156		437
Government-sponsored enterprises		3		3,277		22		5		130		1		8		3,407		23
Total REMICs		12		12,445		404		8		1,924		74		20		14,369		478
Corporate debt		—		—		—		3		3,720		275		3		3,720		275
Total securities temporarily impaired		20	$	22,391	$	439		14	$	5,763	$	351		34	$	28,154	$	790

The Company invests in and is subject to credit risk related to private label mortgage-backed securities that are directly supported by underlying mortgage loans. The Company’s private label mortgage-backed securities are credit-enhanced, senior tranches of securities in which the subordinate classes of the securities provide credit support for the senior class of securities. Losses in the underlying loan pool would generally have to exceed the credit support provided by the subordinate classes of securities before the senior class of securities would experience any credit losses. The Company also invests in corporate debt and is subject to credit risk related to pooled Trust Preferred insurance corporation obligations.

The Company has reviewed its available for sale investment securities at June 30, 2008 and has determined that all unrealized losses are temporary, based on an evaluation of the creditworthiness of the issuers/guarantors as well as the underlying collateral, if applicable, and other facts and circumstances. The Company monitors the credit ratings of all securities for downgrades as well as placement on negative outlook or credit watch. Also, management evaluates other facts and circumstances that may be indicative of an other than temporary impairment condition. Additionally, the Company has the ability and the intent to hold such securities through to recovery of the unrealized losses. The ability and intent of the Company is demonstrated by the fact that the Company is well capitalized and has no need to sell these securities. As a result of this evaluation, management does not believe it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the individual securities. Therefore, the Company does not consider the investments to be other-than-temporarily impaired at June 30, 2008.

9

Note 4. Loans

The following table sets forth the composition of our loan portfolio at the dates indicated.

	June 30, 2008						December 31, 2007						June 30, 2007
(Dollars in thousands)	Amount			Percent			Amount			Percent			Amount			Percent
Real estate-mortgage:
One-to-four family residential	$	146,466			67.7	%	$	135,453			70.4	%	$	132,819			73.3	%
Multi-family		9,215			4.3			11,985			6.2			15,106			8.3
Commercial		18,668			8.6			14,483			7.5			12,438			6.9
Total real estate-mortgage		174,349			80.6			161,921			84.1			160,363			88.5
Real estate-construction:
Residential		9,395			4.3			6,671			3.5			3,206			1.8
Commercial		2,673			1.2			—			—			—			—
Total real estate-construction		12,068			5.5			6,671			3.5			3,206			1.8
Consumer:
Home equity		21,143			9.8			17,862			9.3			12,209			6.7
Loans on savings accounts		689			0.3			675			0.4			410			0.2
Home improvement		253			0.1			281			0.1			318			0.2
Other		617			0.3			592			0.3			666			0.4
Total consumer		22,702			10.5			19,410			10.1			13,603			7.5
Commercial business		7,411			3.4			4,341			2.3			3,916			2.2
Total loans	$	216,530			100.0	%	$	192,343			100.0	%	$	181,088			100.0	%
Net premiums on loans purchased		143						191						251
Net deferred loan costs		556						491						446
Loans in process		(8,460	)					(3,614	)					(1,384	)
Allowance for loan losses		(1,516	)					(1,457	)					(941	)
Loans, net	$	207,253					$	187,954					$	179,460

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Nonperforming Assets.The following table provides information with respect to our nonperforming assets at the dates indicated.

	June 30,			December 31,			June 30,
(Dollars in thousands)	2008			2007			2007
Nonaccrual loans:
Real estate — mortgage	$	749		$	1,264		$	477
Real estate — construction		—			—			—
Consumer		4			17			169
Commercial business		—			—			—
Total		753			1,281			646
Accruing loans past due 90 days or more		—			—			—
Total of nonaccrual and 90 days or more past due loans (nonperforming loans)		753			1,281			646
Real estate owned		974			1,119			569
Total nonperforming assets	$	1,727		$	2,400		$	1,215
Troubled debt restructurings		—			—			—
Troubled debt restructurings and total nonperforming assets	$	1,727		$	2,400		$	1,215
Total nonperforming loans to total loans		0.35	%		0.67	%		0.36	%
Total nonperforming loans to total assets		0.22			0.42			0.24
Total nonperforming assets to total assets		0.51			0.79			0.44

Allowance for loan losses.The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is recorded. The following table summarizes the activity in the allowance for loan losses for the periods indicated.

	Three Months Ended					Six Months Ended					Year Ended
	June 30,					June 30,					December 31,
(Dollars in thousands)	2008			2007		2008			2007		2007
Allowance at beginning of period	$	1,345		$	911	$	1,457		$	866	$	866
Provision for loan losses		220			30		279			75		1,119
Charge-offs		(49	)		—		(220	)		—		(528	)
Recoveries		—			—		—			—		—
Net charge-offs		(49	)		—		(220	)		—		(528	)
Allowance at end of period	$	1,516		$	941	$	1,516		$	941	$	1,457

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Note 5. Deposits

The following table sets forth the balances of our deposit products at the dates indicated.

	June 30, 2008					December 31, 2007					June 30, 2007
(Dollars in thousands)	Amount		Percent			Amount		Percent			Amount		Percent
Noninterest-bearing demand deposits	$	11,137		6.6	%	$	8,918		5.7	%	$	8,799		5.7	%
Interest-bearing demand deposits		12,014		7.1			11,864		7.6			13,341		8.7
Savings accounts		23,950		14.2			23,056		14.8			25,145		16.3
Money market accounts		33,154		19.7			13,676		8.8			12,032		7.8
Certificates of deposit		88,302		52.4			98,044		63.1			94,740		61.5
Total deposits	$	168,557		100.0	%	$	155,558		100.0	%	$	154,057		100.0	%

Note 6. Borrowings

We utilize borrowings as a supplemental source of funds for loans and securities. The primary source of borrowings are FHLB advances and, to a limited extent, repurchase agreements. The following table sets forth information concerning our borrowings for the periods indicated.

	Six Months			Year			Six Months
	Ended			Ended			Ended
	June 30,			December 31,			June 30,
(Dollars in thousands)	2008			2007			2007
Maximum amount outstanding at any month end during the period	$	121,776		$	101,074		$	89,663
Average amounts outstanding during the period		111,534			82,880			82,659
Weighted average rate during the period		4.02	%		4.32	%		4.27	%
Balance outstanding at end of period	$	120,908		$	101,074		$	69,930
Weighted average rate at end of period		3.84	%		4.30	%		4.10	%

Note 7. Earnings (Loss) Per Share

Basic earnings per common share is calculated by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is computed in a manner similar to basic earnings per common share except that the weighted-average number of common shares outstanding is increased to include the incremental common shares (as computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. Common stock equivalents include restricted stock awards and stock options. Anti-dilutive shares are common stock equivalents with weighted-average exercise prices in excess of the weighted-average market value for the periods presented. There was no dilution from stock options for the three months or six months ended June 30, 2008. Unallocated common shares held by the Employee Stock Ownership Plan (“ESOP”) are not included in the weighted-average number of common shares outstanding for purposes of calculating both basic and diluted earnings per common share until they are committed to be released.

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	Three Months Ended					Six Months Ended
	June 30,					June 30,
(Dollars in thousands, except per share amounts)	2008		2007			2008		2007
Net income (loss)	$	65	$	(58	)	$	333	$	(1,027	)
Weighted-average shares outstanding:
Basic		5,995,088		6,444,010			5,983,500		6,414,977
Effect of dilutive stock options and restrictive stock awards		—		4,028			—		4,506
Diluted		5,995,088		6,448,038			5,983,500		6,419,483
Earnings (loss) per share:
Basic	$	0.01	$	(0.01	)	$	0.06	$	(0.16	)
Diluted	$	0.01	$	(0.01	)	$	0.06	$	(0.16	)

Note 8. Insurance Activities of Exchange Underwriters, Inc. and Related Information

Exchange Underwriters, Inc. is managed separately from the banking and related financial services that the Company offers. Exchange Underwriters, Inc. is a full-service, independent insurance agency that offers property and casualty, commercial general liability, surety and other insurance products. The following table sets forth information for Exchange Underwriters, Inc. for the dates indicated.

	Three Months				Six Months				Year
	Ended				Ended				Ended
	June 30,				June 30,				December 31,
(Dollars in thousands)	2008		2007		2008		2007		2007
Insurance commissions	$	393	$	340	$	1,113	$	931	$	1,639
Income before income tax expense		109		70		481		341		472

	June 30,				December 31,
	2008		2007		2007
Total assets	$	1,276	$	1,145	$	1,258

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

This discussion should be read in conjunction with the unaudited consolidated financial statements, notes and tables included in this report. For further information, refer to the consolidated financial statements and notes included in FedFirst Financial Corporation’s Annual Report on Form 10-K for the year ended December 31, 2007, as amended.

Forward-Looking Statements

This report contains certain “forward-looking statements” within the meaning of the federal securities laws. These statements are not historical facts, rather statements based on FedFirst Financial’s current expectations regarding its business strategies, intended results and future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions.

Management’s ability to predict results or the effect of future plans or strategies is inherently uncertain. Factors which could affect actual results include the following: interest rate trends; the general economic climate in the market area in which FedFirst Financial operates, as well as nationwide; FedFirst Financial’s

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ability to control costs and expenses; competitive products and pricing; loan delinquency rates and changes in federal and state legislation and regulation. Additional factors that may affect our results are discussed in FedFirst Financial’s Annual Report on Form 10-K under “Item 1A. Risk Factors.” These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements. FedFirst Financial assumes no obligation to update any forward-looking statements.

General

FedFirst Financial Corporation (“FedFirst Financial” or the “Company”) is a federally chartered savings and loan holding company established in 1999 to be the holding company for First Federal Savings Bank (“First Federal” or the “Bank”), a federally chartered savings bank. FedFirst Financial’s business activity is the ownership of the outstanding capital stock of First Federal. FedFirst Financial does not own or lease any property, but uses the premises, equipment and other property of First Federal with the payment of appropriate rental fees, as required by applicable law and regulations, under the terms of an expense allocation agreement. In the future, FedFirst Financial may acquire or organize other operating subsidiaries; however, there are no current plans, arrangements, agreements or understandings, written or oral, to do so.

We operate as a community-oriented financial institution offering residential, multi-family and commercial mortgages, consumer loans and commercial business loans as well as a variety of deposit products for individuals and businesses from nine locations in southwestern Pennsylvania. We conduct insurance brokerage activities through Exchange Underwriters, Inc., an 80%-owned subsidiary. The Bank is subject to competition from other financial institutions and to the regulations of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

FedFirst Financial Mutual Holding Company (“FFMHC”) is our federally chartered mutual holding company parent. As a mutual holding company, FFMHC is a non-stock company that has as its members the depositors of First Federal. FFMHC does not engage in any business activity other than owning a majority of the common stock of FedFirst Financial. So long as we remain in the mutual holding company form of organization, FFMHC will own a majority of the outstanding shares of FedFirst Financial.

Our website address is www.firstfederal-savings.com. Information on our website should not be considered a part of this Form 10-Q.

Balance Sheet Analysis

Assets.Total assets at June 30, 2008 were $335.7 million, an increase of $30.4 million, or 10.0%, from total assets of $305.3 million at December 31, 2007.

Securities available-for-sale increased $7.2 million, or 8.1%, to $96.2 million at June 30, 2008 compared to $89.1 million at December 31, 2007. In March 2008, the Company purchased $24.4 million in mortgage-backed securities and $4.0 million in Government-sponsored enterprise securities, which was partially offset by the sales and calls of $10.8 million in Government-sponsored enterprise securities and paydowns. This activity was based on an evaluation of the securities portfolio in March 2008 in light of the current economic environment, whereby the Company determined there were several securities likely to be called. In addition, the securities portfolio reflects an unrealized loss of $3.5 million at June 30, 2008 compared to $115,000 at December 31, 2007.

Loans, net, increased $19.3 million, or 10.3%, to $207.3 million at June 30, 2008 compared to $188.0 million at December 31, 2007. The increase was primarily the result of growth in one-to-four family residential real estate, commercial real estate, home equity, and commercial business loans partially offset by payoffs on multi-family loans.

Real estate owned decreased $145,000 to $974,000 at June 30, 2008 compared to $1.1 million at December 31, 2007. The Company sold one property for $509,000. We also transferred two one-to-four family residential real estate properties valued at $360,000 into real estate owned. As part of taking possession of these properties, the Company recorded $183,000 in charge-offs.

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Liabilities.Total liabilities at June 30, 2008 were $294.7 million, compared to $261.4 million at December 31, 2007, an increase of $33.3 million, or 12.7%.

Total deposits increased $13.0 million, or 8.4%, to $168.6 million at June 30, 2008 compared to $155.6 million at December 31, 2007. The increase in deposits was primarily in money market deposit and noninterest-bearing demand deposit accounts. The Company offers a competitive rate on its money market accounts to attract new customers with the intention of retaining and building on such relationships in the future. In addition, the relationships developed with our loan customers have helped drive the increase in money market accounts as well as in noninterest-bearing demand deposits. This increase was partially offset by a decrease in certificates of deposit, primarily in higher costing short-term certificates.

Borrowings increased $19.8 million, or 19.6%, to $120.9 million at June 30, 2008 compared to $101.1 million at December 31, 2007. We utilized borrowings to purchase securities and fund loan growth.

Stockholders’ Equity.Stockholders’ equity was $40.9 million at June 30, 2008, a decrease of $2.9 million from December 31, 2007. The decrease in stockholders’ equity was primarily due to the $2.0 million change in the unrealized loss position of the securities portfolio, net of tax, the repurchase of $985,000 in common stock, and the recognition of a cumulative effect adjustment of $445,000 in the Company’s bank-owned life insurance benefit plan reserve as a result of the adoption of EITF Issue No. 06-4. The decrease was partially offset by net income of $333,000 for the six months ended June 30, 2008.

Results of Operations for the Three Months Ended June 30, 2008 and 2007

Overview.The Company had net income of $65,000 for the three months ended June 30, 2008, compared to a net loss of $58,000 for the same period in 2007.

	Three Months Ended
	June 30,
(Dollars in thousands)	2008			2007
Net income (loss)	$	65		$	(58	)
Return on average assets		0.08	%		(0.08	)%
Return on average equity		0.61			(0.51	)
Average equity to average assets		12.83			16.60

Net Interest Income.Net interest income for the three months ended June 30, 2008 increased $349,000 to $2.0 million as compared to the three months ended June 30, 2007. Interest rate spread and net interest margin were 2.10% and 2.55%, respectively, for the three months ended June 30, 2008 compared to 1.97% and 2.55%, respectively, for the three months ended June 30, 2007. The improvement in interest rate spread is primarily attributed to the growth in the loan and securities portfolio coupled with lower costs on deposits and borrowings.

Interest income increased $647,000, or 17.4%, to $4.4 million for the three months ended June 30, 2008 as compared to the three months ended June 30, 2007 due to an increase of $55.0 million in the average balance of interest-earning assets partially offset by a decrease of 18 basis points in the average yield. Interest income on loans increased $320,000 due to an increase of $24.0 million in the average balance, primarily driven by increases in one-to-four family residential real estate, commercial real estate, and home equity loans. Interest income on securities increased $404,000 due to an increase of $30.1 million in the average balance, primarily from purchases of mortgage-backed securities in March 2008.

Interest expense increased $298,000, or 14.5%, to $2.4 million for the three months ended June 30, 2008 as compared to the three months ended June 30, 2007. Interest expense on deposits decreased $18,000 due to a decrease of 40 basis points in cost related to the repricing of maturing certificates of deposits at lower rates, partially offset by an increase of $16.4 million in the average balance, primarily in money market accounts. Interest expense on borrowings increased $316,000 due to an increase of $37.5 million in the average balance, partially offset by a decrease of 28 basis points in cost related to the repricing of borrowings at lower costs in the current economic environment.

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Average Balances and Yields.The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented and are expressed in annualized rates (dollars in thousands).

	Three Months Ended June 30,
			2008							2007
			Interest							Interest
	Average		and		Yield/			Average		and		Yield/
	Balance		Dividends		Cost			Balance		Dividends		Cost
Assets:
Interest-earning assets:
Loans, net(1)(2)	$	199,979	$	2,901		5.80	%	$	175,986	$	2,581		5.87	%
Securities(3)		101,883		1,373		5.39			71,738		969		5.40
Other interest-earning assets		11,914		81		2.72			11,083		158		5.70
Total interest-earning assets		313,776	$	4,355		5.55			258,807	$	3,708		5.73
Noninterest-earning assets		18,150							17,541
Total assets	$	331,926						$	276,348
Liabilities and Stockholders’ equity:
Interest-bearing liablities:
Interest-bearing demand deposits	$	11,931	$	14		0.47	%	$	13,137	$	16		0.49	%
Savings accounts		23,582		44		0.75			25,418		64		1.01
Money market accounts		27,745		217		3.13			11,235		112		3.99
Certificates of deposit		95,637		956		4.00			92,755		1,057		4.56
Total interest-bearing deposits		158,895		1,231		3.10			142,545		1,249		3.50
Borrowings		114,001		1,125		3.95			76,519		809		4.23
Total interest-bearing liabilities		272,896		2,356		3.45			219,064		2,058		3.76
Noninterest-bearing liabilities		16,438							11,424
Total liabilities		289,334							230,488
Stockholders’ equity		42,592							45,860
Total liabilities and stockholders’ equity	$	331,926						$	276,348
Net interest income			$	1,999						$	1,650
Interest rate spread(4)						2.10	%						1.97	%
Net interest margin(5)						2.55							2.55
Average interest-earning assets to average interest-bearing liablities						114.98	%						118.14	%

(1)	Amount is net of deferred loan costs, loans in process and estimated allowance for loan losses.
(2)	Amount includes nonaccrual loans in average balances only.
(3)	Amount does not include effect of unrealized gain (loss) on securities available-for-sale.
(4)	Interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities.
(5)	Net interest margin represents net interest income divided by average interest-earning assets.

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Rate/Volume Analysis.The following table sets forth the effects of changing rates and volumes on our net interest income. The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). Changes related to volume/rate are prorated into volume and rate components. The total column represents the net change in volume and rate.

	Three Months Ended June 30, 2008
			Compared To
	Three Months Ended June 30, 2007
	Increase (decrease) due to
(Dollars in thousands)	Volume		Rate			Total
Interest and dividend income:
Loans, net	$	351	$	(31	)	$	320
Securities		406		(2	)		404
Other interest-earning assets		11		(88	)		(77	)
Total interest-earning assets		768		(121	)		647
Interest expense:
Deposits		133		(151	)		(18	)
Borrowings		373		(57	)		316
Total interest-bearing liablities		506		(208	)		298
Change in net interest income	$	262	$	87		$	349

Provision for Loan Losses.The provision for loan losses was $220,000 for the three months ended June 30, 2008 compared to $30,000 for the three months ended June 30, 2007. The increase in the provision is primarily related to growth in the commercial, one-to-four family residential, and home equity portions of the loan portfolio as well as current economic conditions in the housing and credit markets. Net charge-offs were $49,000 for the three months ended June 30, 2008. The charge-offs were related to four consumer loans and two one-to-four family residential real estate loans. There were no charge-offs for the three months ended June 30, 2007.

Noninterest Income.Noninterest income increased $73,000, or 14.1%, to $589,000 for the three months ended June 30, 2008 compared to $516,000 for the three months ended June 30, 2007. The change is primarily attributed to an increase of $53,000 in insurance commissions.

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Noninterest Expense.The following table summarizes noninterest expense for the periods indicated.

	Three Months Ended
	June 30,
(Dollars in thousands)	2008		2007
Compensation and employee benefits	$	1,312	$	1,356
Occupancy		318		278
FDIC insurance premiums		5		5
Data processing		105		95
Advertising		38		44
Professional services		141		146
Stationary, printing and supplies		30		34
Telephone		15		14
Postage		33		33
Correspondent bank fees		36		30
All other		203		170
Total noninterest expense	$	2,236	$	2,205

Noninterest expense increased $31,000, or 1.4%, for the three months ended June 30, 2008 compared to the three months ended June 30, 2007. The increase is primarily related to additional occupancy costs related to the opening of the Washington office in June 2007.

Income Tax (Benefit) Expense.Income tax expense for the three months ended June 30, 2008 was $54,000 compared to an income tax benefit of $18,000 for the same period in 2007.

Results of Operations for the Six Months Ended June 30, 2008 and 2007

Overview.The Company had net income of $333,000 for the six months ended June 30, 2008 compared to a net loss of $1.0 million for the same period in 2007. The increase in net income is primarily the result of the recognition of a $1.4 million loss related to the securities portfolio restructuring included in noninterest income in the 2007 period. In addition, net interest income increased $715,000 to $3.9 million for the six months ended June 30, 2008 compared to $3.2 million for the six months ended June 30, 2007. For the six months ended June 30, 2008, the Company recorded a provision for loan losses of $279,000 compared to $75,000 for the same period in 2007. The increase in the provision is the result of loan growth and charge-offs of $220,000.

	Six Months Ended
	June 30,
(Dollars in thousands)	2008			2007
Net income (loss)	$	333		$	(1,027	)
Return on average assets		0.20	%		(0.73	)%
Return on average equity		1.55			(4.45	)
Average equity to average assets		13.18			16.44

Net Interest Income.Net interest income for the six months ended June 30, 2008 increased $715,000 to $3.9 million compared to $3.2 million for the six months ended June 30, 2007. Interest rate spread and net interest margin were 2.05% and 2.53%, respectively, for the six months ended June 30, 2008 compared to 1.84% and 2.40%, respectively, for the six months ended June 30, 2007. The improvement in interest rate spread and net interest margin is primarily attributed to growth in loans and securities. The securities restructuring in April 2007 and the Company’s decision in March 2008 to sell several securities that were likely to be called and

18

purchase mortgage-backed securities improved the overall yield on securities. In addition, the Company’s maturing short-term certificates of deposits and borrowings repriced at lower interest rates.

Interest income increased $1.3 million, or 17.9%, to $8.7 million for the six months ended June 30, 2008 as compared to the six months ended June 30, 2007 due to an increase in the average balance of interest-earning assets of $43.6 million. Interest income on loans increased $644,000 due to increases of $19.6 million in the average balance, primarily driven by one-to-four family residential, commercial real estate, and home equity loans. Interest income on securities increased $765,000 due to an increase of $22.4 million in the average balance and 38 basis points in yield. The securities restructuring in April 2007 and the Company’s decision in March 2008 to sell several securities that were likely to be called and purchase mortgage-backed securities improved the overall yield on securities.

Interest expense increased $600,000, or 14.3%, for the six months ended June 30, 2008 as compared to the six months ended June 30, 2007. Interest expense on deposits increased $122,000 due to an increase of $14.2 million in the average balance partially offset by a decrease of 16 basis points in cost. The increase in average balances was primarily related to the marketing of competitive rates on our performance money market deposit accounts. Interest expense on borrowings increased $478,000 due to an increase of $28.9 million in the average balance partially offset by a decrease of 25 basis points in cost.

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Average Balances and Yields.The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented and are expressed in annualized rates (dollars in thousands).

	Six Months Ended June 30,
	2008							2007
			Interest							Interest
	Average		and		Yield/			Average		and		Yield/
	Balance		Dividends		Cost			Balance		Dividends		Cost
Assets:
Interest-earning assets:
Loans, net(1)(2)	$	195,321	$	5,719		5.86	%	$	175,760	$	5,075		5.77	%
Securities(3)		100,308		2,759		5.50			77,948		1,994		5.12
Other interest-earning assets		11,411		183		3.21			9,742		277		5.69
Total interest-earning assets		307,040	$	8,661		5.64			263,450	$	7,346		5.58
Noninterest-earning assets		18,721							17,099
Total assets	$	325,761						$	280,549
Liabilities and Stockholders’ equity:
Interest-bearing liablities:
Interest-bearing demand deposits	$	11,915	$	28		0.47	%	$	13,067	$	31		0.47	%
Savings accounts		23,347		95		0.81			25,829		128		0.99
Money market accounts		21,507		344		3.20			9,890		187		3.78
Certificates of deposit		98,400		2,072		4.21			92,136		2,071		4.50
Total interest-bearing deposits		155,169		2,539		3.27			140,922		2,417		3.43
Borrowings		111,534		2,243		4.02			82,659		1,765		4.27
Total interest-bearing liabilities		266,703		4,782		3.59			223,581		4,182		3.74
Noninterest-bearing liabilities		16,126							10,837
Total liabilities		282,829							234,418
Stockholders’ equity:		42,932							46,131
Total liabilities and stockholders’ equity	$	325,761						$	280,549
Net interest income			$	3,879						$	3,164
Interest rate spread(4)						2.05	%						1.84	%
Net interest margin(5)						2.53							2.40
Average interest-earning assets to average interest-bearing liablities						115.12	%						117.83	%

(1)	Amount is net of deferred loan costs, loans in process and estimated allowance for loan losses.
(2)	Amount includes nonaccrual loans in average balances only.
(3)	Amount does not include effect of unrealized gain (loss) on securities available-for-sale.
(4)	Interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities.
(5)	Net interest margin represents net interest income divided by average interest-earning assets.

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Rate/Volume Analysis.The following table sets forth the effects of changing rates and volumes on our net interest income. The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). Changes related to volume/rate are prorated into volume and rate components. The total column represents the net change in volume and rate.

	Six Months Ended June 30, 2008
	Compared To
	Six Months Ended June 30, 2007
	Increase (decrease) due to
(Dollars in thousands)	Volume		Rate			Total
Interest and dividend income:
Loans, net	$	564	$	80		$	644
Securities		608		157			765
Other interest-earning assets		42		(136	)		(94	)
Total interest-earning assets		1,214		101			1,315
Interest expense:
Deposits		236		(114	)		122
Borrowings		586		(108	)		478
Total interest-bearing liablities		822		(222	)		600
Change in net interest income	$	392	$	323		$	715

Provision for Loan Losses.The provision for loan losses was $279,000 for the six months ended June 30, 2008 compared to $75,000 for the six months ended June 30, 2007. The increase in the provision is primarily related to growth in the commercial, one-to-four family residential, and home equity portions of the loan portfolio as well as current economic conditions in the housing and credit markets. Net charge-offs were $220,000 for the six months ended June 30, 2008. There were no charge-offs for the six months ended June 30, 2007.

Noninterest Income.Noninterest income increased $1.8 million to $1.6 million for the six months ended June 30, 2008 compared to a net loss of $134,000 for the six months ended June 30, 2007. The increase was primarily attributable to a $1.4 million loss recorded as a result of the securities restructuring which was completed in the prior period. In addition, insurance commissions increased $182,000 compared to the prior period and the Company recognized a gain of $156,000 on the sales of securities in the current period.

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Noninterest Expense.The following table summarizes noninterest expense for the periods indicated.

	Six Months Ended
	June 30,
(Dollars in thousands)	2008		2007
Compensation and employee benefits	$	2,774	$	2,776
Occupancy		659		531
FDIC insurance premiums		11		11
Data processing		211		185
Advertising		70		73
Professional services		270		284
Stationary, printing and supplies		58		65
Telephone		31		26
Postage		71		64
Correspondent bank fees		79		61
All other		356		343
Total noninterest expense	$	4,590	$	4,419

Noninterest expense increased $171,000, or 3.9%, for the six months ended June 30, 2008, as compared to the six months ended June 30, 2007. The increase is primarily related to increased occupancy costs for the six months ended June 30, 2008 in connection with the opening of the Washington office in June 2007.

Income Tax (Benefit) Expense.Income tax expense for the six months ended June 30, 2008 was $255,000 compared to an income tax benefit of $475,000 for the same period in 2007. The benefit recorded for the six months ended June 30, 2007 was primarily from the loss recorded as a result of the securities portfolio restructuring.

Liquidity and Capital Management

Liquidity Management.Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of available-for-sale securities and borrowings. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

We regularly adjust our investments in liquid assets based upon our assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities and (4) the objectives of our asset/liability management policy.

Our most liquid assets are cash and cash equivalents and interest-bearing deposits. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At June 30, 2008, cash and cash equivalents totaled $7.3 million. At June 30, 2008, securities classified as available-for-sale totaled $96.2 million, which provides an additional source of liquidity. In addition, at June 30, 2008, we had the ability to borrow approximately $186.8 million from the FHLB of Pittsburgh. On June 30, 2008, we had $115.4 million of FHLB advances outstanding and the maximum remaining borrowing capacity at the FHLB was approximately $71.4 million.

Certificates of deposit due within one year of June 30, 2008 totaled $51.0 million, or 57.7% of certificates of deposit. If these maturing deposits do not remain with us, we will be required to seek other sources of funds including other certificates of deposit and borrowings. We believe, however, based on past experience, that a significant portion of our maturing certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

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The following table summarizes the Company’s commitments at the date indicated.

	June 30,
(Dollars in thousands)	2008
Loans in process	$	8,460
Unused revolving lines of credit		2,806
Unused commercial business lines of credit		1,841
One-to-four family residential commitments		6,641
Consumer commitments		863
Total commitments outstanding	$	20,611

Capital Management.We are subject to various regulatory capital requirements administered by the Office of Thrift Supervision, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At June 30, 2008, we exceeded all of our regulatory capital requirements and are considered “well capitalized” under regulatory guidelines.

Off-Balance Sheet Arrangements.In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit.

For the six months ended June 30, 2008, we engaged in no off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable as the registrant is a smaller reporting company.

Item 4. Controls and Procedures.

FedFirst Financial’s management, including FedFirst Financial’s principal executive officer and principal financial officer, have evaluated the effectiveness of FedFirst Financial’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, FedFirst Financial’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that FedFirst Financial files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to FedFirst Financial’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in FedFirst Financial’s internal control over financial reporting during the quarter ended June 30, 2008, that has materially affected, or is reasonably likely to materially affect, FedFirst Financial’s internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2007, as amended, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or operating results.

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

The Company made the following purchases of its common stock during the three months ended June 30, 2008.

					Total Number of
					Shares Purchased		Maximum Number
					as Part of the		of Shares that May
	Total Number		Average Price		Publicly		Yet Be Purchased
	of Shares		Paid per		Announced		Under the Program
Period	Purchased		Share		Program(1)		(1)
April 2008		55,100	$	8.09		55,100		15,000
May 2008		16,350		6.96		16,350		138,650
June 2008		10,575		7.14		10,575		128,075
Total		82,025		7.74		82,025

(1)

On September 27, 2007, the Company announced that the board of directors had approved a program allowing the Company to repurchase up to 147,500 shares of the Company’s outstanding common stock, which was approximately 5% of outstanding shares held by persons other than FFMHC on that date. On May 5, 2008, the Company completed the purchases under this program.

On May 22, 2008, the Company announced that the board of directors had approved a program allowing the Company to repurchase up to 140,000 shares of the Company’s outstanding common stock, which was approximately 5% of outstanding shares held by persons other than FFMHC on that date. This repurchase program is scheduled to expire on November 30, 2008. As of June 30, 2008, 11,925 shares of the Company’s common stock had been repurchased under this program.

Item 3. Defaults Upon Senior Securities.

Not applicable.

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

The Annual Meeting of Shareholders of FedFirst Financial Corporation was held on May 22, 2008. Proxies were solicited pursuant to Section 14(a) of the Securities and Exchange Act of 1934 and there was no solicitation in opposition to the Company’s solicitations.

The following nominees proposed by the Board of Directors were elected as Directors for three-year terms expiring at the 2011 Annual Meeting:

Nominees	Votes For		Votes Withheld
Joseph U. Frye		5,409,681		379,574
John J. LaCarte		5,550,031		239,224

A vote was taken on a proposal to ratify the appointment by the Board of Directors of the firm of Beard Miller Company LLP as independent auditors of FedFirst Financial Corporation for the fiscal year ending December 31, 2008 with the results as follows:

			Percent of Shares
Summary	Number		Represented at the Meeting
of Votes	of Shares		and Entitled to Vote
For		5,678,532		98.1	%
Against		104,706		1.8	%
Abstain		6,017		0.1	%

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

3.1	Amended and Restated Charter of FedFirst Financial Corporation(1)
3.2	Amended and Restated Bylaws of FedFirst Financial Corporation(2)
4.0	Specimen Stock Certificate of FedFirst Financial Corporation(1)
10.1	Amendment, dated June 1, 2008, to the Employment Agreement between Exchange Underwriters, Inc. and Richard B. Boyer, effective June 1, 2002(3)
31.1	Rule 13a-14 (a) / 15d-14 (a) Certification (President and Chief Executive Officer)
31.2	Rule 13a-14 (a) / 15d-14 (a) Certification (Chief Financial Officer)
32.1	Certification of John G. Robinson pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Robert C. Barry Jr. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)	Incorporated herein by reference to the Exhibits to the Registration Statement on Form SB-2, and amendments thereto, initially filed on December 17, 2004, Registration No. 333-121405.
(2)	Incorporated herein by reference to the Exhibits to FedFirst Financial Corporation’s Form 8-K filed on October 26, 2007.
(3)	Management contract or compensation plan or arrangement.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	FEDFIRST FINANCIAL CORPORATION
	(Registrant)
Date: August 8, 2008	/s/ John G. Robinson
	John G. Robinson
	President and Chief Executive Officer
Date: August 8, 2008	/s/ Robert C. Barry Jr.
	Robert C. Barry Jr.
	Chief Financial Officer and Senior Vice President (Principal Financial Officer and Chief Accounting Officer)

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