Fedfirst Financial 10-Q 2008 Q3 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 endedSeptember 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. Yes þ     No o

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). Yes o     No þ

As of November 12, 2008, the issuer had 6,355,275 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 September 30, 2008 (Unaudited) and December 31, 2007		1
Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2008 and 2007		2
Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive (Loss) Income for the Nine Months Ended September 30, 2008 and 2007 (Unaudited)		3
Consolidated Statements of Cash Flows for the Nine Months Ended September 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		16
Item 3. Quantitative and Qualitative Disclosures About Market Risk		27
Item 4. Controls and Procedures		27
PART II – OTHER INFORMATION
Item 1. Legal Proceedings		28
Item 1A. Risk Factors		28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		28
Item 3. Defaults Upon Senior Securities		28
Item 4. Submission of Matters to a Vote of Security Holders		28
Item 5. Other Information		29
Item 6. Exhibits		29
SIGNATURES		30
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

	September 30,			December 31,
	2008			2007
(Dollars in thousands, except share data)	(UNAUDITED)
Assets:
Cash and cash equivalents:
Cash and due from banks	$	2,035		$	2,127
Interest-earning deposits		5,614			3,425
Total cash and cash equivalents		7,649			5,552
Securities available-for-sale		91,906			89,073
Loans, net		225,455			187,954
Federal Home Loan Bank (“FHLB”) stock, at cost		6,628			5,076
Accrued interest receivable — loans		1,090			966
Accrued interest receivable — securities		472			651
Premises and equipment, net		2,800			2,956
Bank-owned life insurance		7,741			7,538
Goodwill		1,080			1,080
Real estate owned		674			1,119
Other assets		351			366
Deferred tax assets		4,265			2,942
Total assets	$	350,111		$	305,273
Liabilities and Stockholders’ Equity:
Deposits:
Noninterest-bearing		13,655			8,918
Interest-bearing		159,430			146,640
Total deposits		173,085			155,558
Borrowings		131,508			101,074
Advance payments by borrowers for taxes and insurance		251			477
Accrued interest payable — deposits		892			1,116
Accrued interest payable — borrowings		550			413
Other liabilities		3,270			2,782
Total liabilities		309,556			261,420
Minority interest in subsidiary		89			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 6,380,275 and 6,518,200 shares outstanding		67			67
Additional paid-in-capital		29,169			29,084
Retained earnings — substantially restricted		18,474			18,520
Accumulated other comprehensive loss, net of deferred taxes of $(1,613) and $(45)		(2,501	)		(70	)
Unearned Employee Stock Ownership Plan (“ESOP”)		(1,944	)		(2,074	)
Common stock held in treasury, at cost (327,225 and 189,300 shares)		(2,799	)		(1,754	)
Total stockholders’ equity		40,466			43,773
Total liabilities and stockholders’ equity	$	350,111		$	305,273

See Notes to the Unaudited Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	For the Three Months					For the Nine Months
	Ended September 30,					Ended September 30,
(Dollars in thousands, except per share data)	2008		2007			2008		2007
Interest income:
Loans	$	3,218	$	2,689		$	8,937	$	7,764
Securities		1,315		1,005			4,074		2,999
Other interest-earning assets		69		131			252		408
Total interest income		4,602		3,825			13,263		11,171
Interest expense:
Deposits		1,149		1,372			3,688		3,789
Borrowings		1,273		804			3,516		2,569
Total interest expense		2,422		2,176			7,204		6,358
Net interest income		2,180		1,649			6,059		4,813
Provision for loan losses		260		395			539		470
Net interest income after provision for loan losses		1,920		1,254			5,520		4,343
Noninterest income:
Fees and service charges		132		108			352		304
Insurance commissions		373		397			1,486		1,328
Income from bank-owned life insurance		67		70			203		212
Net gain (loss) on sales of securities		—		(2	)		156		(1,412	)
Net gain on sale of real estate owned		3		—			—		—
Other		7		2			19		9
Total noninterest income		582		575			2,216		441
Noninterest expense:
Compensation and employee benefits		1,373		1,463			4,147		4,239
Occupancy		328		301			987		832
FDIC insurance premiums		9		6			20		17
Data processing		104		94			315		279
Other		566		462			1,501		1,378
Total noninterest expense		2,380		2,326			6,970		6,745
Minority interest in net income of consolidated subsidiary		5		15			61		53
Income (loss) before income tax expense (benefit)		117		(512	)		705		(2,014	)
Income tax expense (benefit)		51		(165	)		306		(640	)
Net income (loss)	$	66	$	(347	)	$	399	$	(1,374	)
Earnings (loss) per share:
Basic and diluted	$	0.01	$	(0.05	)	$	0.07	$	(0.21	)
Weighted-average shares outstanding:
Basic		5,905,927		6,438,228			5,968,648		6,442,220
Diluted		5,905,927		6,438,228			5,968,648		6,442,220

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
(Dollars in thousands)	Stock		Capital			Earnings			Loss			ESOP			Treasury			Equity			Loss
Balance at January 1, 2007	$	67	$	28,787		$	20,475		$	(737	)	$	(2,246	)	$	—		$	46,346
Comprehensive income:
Net loss		—		—			(1,374	)		—			—			—			(1,374	)	$	(1,374	)
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 $(191)		—		—			—			(296	)		—			—			(296	)		(296	)
Purchase of common stock to be held in treasury (121,200 shares)		—		—			—			—			—			(1,125	)		(1,125	)
ESOP shares committed to be released (12,961 shares)		—		(10	)		—			—			129			—			119
Stock-based compensation expense		—		246			—			—			—			—			246
Stock awards granted		—		(51	)		—			—			—			51			—
Stock awards forfeited		—		29			—			—			—			(30	)		(1	)
Total comprehensive loss																					$	(813	)
Balance at September 30, 2007	$	67	$	29,001		$	19,101		$	(176	)	$	(2,117	)	$	(1,104	)	$	44,772

									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		—		—			399			—			—			—			399		$	399
Unrealized loss on securities available-for-sale, net of tax of ($1,506)		—		—			—			(2,336	)		—			—			(2,336	)		(2,336	)
Reclassification adjustment on sales of securities available-for-sale, net of tax of $61		—		—			—			(95	)		—			—			(95	)		(95	)
Cumulative effect adjustment on benefit plan reserve		—		—			(445	)		—			—			—			(445	)
Purchase of common stock to be held in treasury (154,925 shares)		—		—			—			—			—			(1,194	)		(1,194	)
ESOP shares committed to be released (12,961 shares)		—		(33	)		—			—			130			—			97
Stock-based compensation expense		—		267			—			—			—			—			267
Stock awards granted		—		(149	)		—			—			—			149			—
Total comprehensive loss																					$	(2,032	)
Balance at September 30, 2008	$	67	$	29,169		$	18,474		$	(2,501	)	$	(1,944	)	$	(2,799	)	$	40,466

See Notes to the Unaudited Consolidated Financial Statements

3

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Period
	Ended September 30,
(Dollars in thousands)	2008			2007
Cash flows from operating activities:
Net income (loss)	$	399		$	(1,374	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Minority interest in net income of consolidated subsidiary		61			53
Provision for loan losses		539			470
Depreciation		376			299
Net (gain) loss on sales of securities		(156	)		1,412
Proceeds from sales of securities held for trading		—			40,483
Proceeds from principal repayments of securities held for trading		—			638
Net amortization of security premiums and loan costs		(379	)		(588	)
Non cash expense for ESOP		97			119
Non cash expense for stock-based compensation		267			246
Increase in bank-owned life insurance		(203	)		(212	)
Decrease in other assets		36			96
Increase in other liabilities		479			141
Net cash provided by operating activities		1,516			41,783
Cash flows from investing activities:
Net loan originations		(38,066	)		(13,281	)
Proceeds from sale of student loan portfolio		—			12
Proceeds from maturities of and principal repayments of securities available-for-sale		12,955			13,293
Proceeds from sales of securities available-for-sale		8,766			2,569
Purchases of securities available-for-sale		(28,352	)		(51,219	)
Purchases of premises and equipment		(220	)		(1,184	)
(Increase) decrease in FHLB stock, at cost		(1,552	)		365
Proceeds from sale of real estate owned		509			—
Net cash used in investing activities		(45,960	)		(49,445	)
Cash flows from financing activities:
Net increase (decrease) in borrowings		30,434			(1,717	)
Net increase in deposits		17,527			11,069
Increase in advance payments by borrowers for taxes and insurance		(226	)		(43	)
Purchases of common stock held in treasury		(1,194	)		(1,125	)
Net cash provided by financing activities		46,541			8,184
Net increase in cash and cash equivalents		2,097			522
Cash and cash equivalents, beginning of period		5,552			4,499
Cash and cash equivalents, end of period	$	7,649		$	5,021
Supplemental cash flow information:
Cash paid for:
Interest on deposits and borrowings	$	7,291		$	6,359
Income tax expense		44			36
Transfer of securities from available-for-sale to held for trading		—			42,531
Real estate acquired in settlement of loans		360			641

See Notes to the Unaudited Consolidated Financial Statements

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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 nine months ended September 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.

Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own Stock.In June 2008, the FASB ratified EITF 07-5,Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own Stock. EITF 07-5 provides that an entity should use a two step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. It also clarifies the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

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.

6

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 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 No. 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 No. 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.

Determination of the Useful Life of Intangible Assets.In April 2008, the FASB issued FSP SFAS No. 142-3,Determination of the Useful Life of Intangible Assets. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142,Goodwill and Other Intangible Assets. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141R, and other generally accepted accounting principles. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

Determining the Fair Value of a Financial Asset When The Market for That Asset Is Not Active:In October 2008, the FASB issued FSP 157-3,Determining the Fair Value of a Financial Asset When The Market for That Asset Is Not Active, to clarify the application of the provisions of SFAS No. 157 in an inactive market and how an entity would determine fair value in an inactive market. FSP 157-3 is effective immediately and applies to the Company’s September 30, 2008 financial statements. The application of the provisions of FSP 157-3 affected the Company’s results of operations and financial condition as of and for the periods ended September 30, 2008. Refer to Note 3 for discussion on SFAS No. 157.

Staff Accounting Bulletin No. 110.Staff Accounting Bulletin (SAB) No. 110 amends and replaces Question 6 of Section D.2 of Topic 14,Share-Based Payment, of the SAB series. Question 6 of Section D.2 of Topic 14 expresses the views of the staff regarding the use of the “simplified” method in developing an estimate of expected term of “plain vanilla” share options and allows usage of the “simplified” method for share option grants prior to December 31, 2007. SAB No. 110 allows public companies which do not have historically sufficient experience to provide a reasonable estimate to continue use of the “simplified” method for estimating the expected term of “plain vanilla” share option grants after December 31, 2007. SAB 110 was effective January 1, 2008.

Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards.In June 2007, the EITF reached a consensus on Issue No. 06-11,Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards. EITF 06-11 states that an entity should recognize a realized tax benefit associated with dividends on nonvested equity shares, nonvested equity share units and outstanding equity share options charged to retained earnings as an increase in additional paid-in-capital. The amount recognized in additional paid-in-capital should be included in the pool of excess tax benefits available to absorb potential future tax deficiencies on share-based payment awards. EITF 06-11 should be applied prospectively to income tax benefits of dividends on equity-classified share-based payment awards that are declared in fiscal years beginning after December 15, 2007. The Company expects that EITF 06-11 will not have an impact on its consolidated financial statements.

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Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements:In March 2007, the EITF reached a consensus on Issue No. 06-4,Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements, 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
September 30, 2008	Cost		Gains		Losses		Value
Government-Sponsored Enterprises	$	14,712	$	71	$	146	$	14,637
Mortgage-backed		53,397		281		286		53,392
REMICs		23,867		75		3,031		20,911
Corporate debt		3,995		—		1,078		2,917
Equities		49		—		—		49
Total securities available-for-sale	$	96,020	$	427	$	4,541	$	91,906

			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 majority of the Company’s securities are included in Level 2 of the fair value hierarchy. Fair values were determined by a third party pricing service using both quoted prices for similar assets, when available, and model-based valuation techniques that derive fair value based on market-corroborated data, such as instruments with similar prepayment speeds and default interest rates. In some instances, the fair value of certain securities cannot be determined using these techniques due to the lack of relevant market data. As such, these securities are valued using an alternative technique and classified within Level 3 of the fair value hierarchy.

At September 30, 2008, Level 3 includes 12 securities totaling $6.7 million. This balance is comprised of 9 mortgage-backed securities at $3.8 million and three corporate debt securities at $2.9 million, which are pooled trust preferred insurance corporation term obligations. The mortgage-backed securities which were AAA rated at purchase do not have an active market and as such the Company has used an alternative method to determine the fair value of these securities. The fair value has been determined using a discounted cash flow model using market assumptions, which generally include cash flow, collateral and other market assumptions. The corporate debt securities, which were rated A at purchase, could not be priced using quoted market prices, observable market activity or comparable trades, and the financial market was considered not active. The trust preferred market has been severely impacted by the lack of liquidity in the credit markets and concern over the banking industry. Fair values for trust preferred securities were obtained from pricing sources with reasonable pricing transparency, taking into account other unobservable inputs related to the risks for each issuer. The pooled trust preferred corporate term obligations owned are collateralized by the trust preferred securities of insurance companies in the U.S. There has been little or no active trading in these securities for approximately three months; therefore it was more appropriate to determine fair value using a discounted cash flow analysis. To determine the appropriate discount rate and cash flows, a review was completed for each of the issuer’s profitability, credit quality, operating efficiency, capital adequacy, leverage and liquidity position. These factors provided an assessment of the probability of default for each underlying piece of collateral for each year until maturity. Determining the appropriate discount rate for the discounted cash flow analysis combined current and observable market spreads for comparable structured credit products with specific risks identified within each issue. The observable market spreads incorporated both credit and liquidity premiums.

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

	Significant Other		Significant
(Dollars in thousands)	Observable Inputs		Unobservable Inputs
September 30, 2008	(Level 2)		(Level 3)		Total
Securities available-for-sale	$	85,246	$	6,660	$	91,906

	Significant
	Unobservable Inputs
(Dollars in thousands)	(Level 3)
December 31, 2007	$	6,390
Total unrealized losses		(858	)
Paydowns and maturities		(227	)
Net transfers in (out) of level 3		1,355
September 30, 2008	$	6,660
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 September 30, 2008	$	(858	)

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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
September 30, 2008	Securities		Value		Losses		Securities		Value		Losses		Securities		Value		Losses
Government-sponsored enterprises		2	$	3,854	$	146		—	$	—	$	—		2	$	3,854	$	146
Mortgage-backed		51		31,234		285		2		15		1		53		31,249		286
REMICs:
Private label issuer:
Prime fixed and adjustable rate		5		2,301		496		1		660		109		6		2,961		605
Alt-A fixed rate		10		7,507		2,063		1		1,317		275		11		8,824		2,338
Government-sponsored enterprises		7		1,501		88		—		—		—		7		1,501		88
Total REMICs		22		11,309		2,647		2		1,977		384		24		13,286		3,031
Corporate debt		—		—		—		3		2,917		1,078		3		2,917		1,078
Total securities temporarily impaired		75	$	46,397	$	3,078		7	$	4,909	$	1,463		82	$	51,306	$	4,541

	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 term obligations.

The Company has reviewed its available for sale investment securities at September 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 September 30, 2008.

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Note 4. Loans

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

	September 30, 2008						December 31, 2007						September 30, 2007
(Dollars in thousands)	Amount			Percent			Amount			Percent			Amount			Percent
Real estate-mortgage:
One-to-four family residential	$	156,634			66.8	%	$	135,453			70.4	%	$	136,237			71.9	%
Multi-family		10,288			4.4			11,985			6.2			14,087			7.4
Commercial		20,988			9.0			14,483			7.5			13,143			6.9
Total real estate-mortgage		187,910			80.2			161,921			84.1			163,467			86.2
Real estate-construction:
Residential		11,131			4.8			6,671			3.5			4,127			2.2
Commercial		2,543			1.1			—			—			—			—
Total real estate-construction		13,674			5.9			6,671			3.5			4,127			2.2
Consumer:
Home equity		21,891			9.2			17,862			9.3			15,713			8.3
Loans on savings accounts		865			0.4			675			0.4			597			0.3
Home improvement		243			0.1			281			0.1			293			0.2
Other		617			0.3			592			0.3			655			0.3
Total consumer		23,616			10.0			19,410			10.1			17,258			9.1
Commercial business		9,099			3.9			4,341			2.3			4,821			2.5
Total loans	$	234,299			100.0	%	$	192,343			100.0	%	$	189,673			100.0	%
Net premiums on loans purchased		129						191						254
Net deferred loan costs		887						491						478
Loans in process		(8,214	)					(3,614	)					(2,537	)
Allowance for loan losses		(1,646	)					(1,457	)					(1,018	)
Loans, net	$	225,455					$	187,954					$	186,850

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

	September 30,			December 31,			September 30,
(Dollars in thousands)	2008			2007			2007
Nonaccrual loans:
Real estate — mortgage	$	853		$	1,264		$	950
Real estate — construction		—			—			—
Consumer		5			17			161
Commercial business		—			—			—
Total		858			1,281			1,111
Accruing loans past due 90 days or more		—			—			—
Total of nonaccrual and 90 days or more past due loans (nonperforming loans)		858			1,281			1,111
Real estate owned		674			1,119			1,210
Total nonperforming assets	$	1,532		$	2,400		$	2,321
Troubled debt restructurings		—			—			—
Troubled debt restructurings and total nonperforming assets	$	1,532		$	2,400		$	2,321
Total nonperforming loans to total loans		0.37	%		0.67	%		0.59	%
Total nonperforming loans to total assets		0.25			0.42			0.38
Total nonperforming assets to total assets		0.44			0.79			0.80

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						Nine Months Ended						Year Ended
	September 30,						September 30,						December 31,
(Dollars in thousands)	2008			2007			2008			2007			2007
Allowance at beginning of period	$	1,516		$	941		$	1,457		$	866		$	866
Provision for loan losses		260			395			539			470			1,119
Charge-offs		(130	)		(318	)		(350	)		(318	)		(528	)
Recoveries		—			—			—			—			—
Net charge-offs		(130	)		(318	)		(350	)		(318	)		(528	)
Allowance at end of period	$	1,646		$	1,018		$	1,646		$	1,018		$	1,457

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Note 5. Deposits

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

	September 30, 2008					December 31, 2007					September 30, 2007
(Dollars in thousands)	Amount		Percent			Amount		Percent			Amount		Percent
Noninterest-bearing demand deposits	$	13,655		7.9	%	$	8,918		5.7	%	$	9,212		6.0	%
Interest-bearing demand deposits		11,233		6.5			11,864		7.6			12,675		8.2
Savings accounts		23,662		13.7			23,056		14.8			24,032		15.5
Money market accounts		39,935		23.1			13,676		8.8			13,590		8.8
Certificates of deposit		84,600		48.8			98,044		63.1			95,055		61.5
Total deposits	$	173,085		100.0	%	$	155,558		100.0	%	$	154,564		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.

	Nine Months			Year			Nine Months
	Ended			Ended			Ended
	September 30,			December 31,			September 30,
(Dollars in thousands)	2008			2007			2007
Maximum amount outstanding at any month end during the period	$	131,508		$	101,074		$	89,663
Average amounts outstanding during the period		116,812			82,880			79,926
Weighted average rate during the period		4.01	%		4.32	%		4.29	%
Balance outstanding at end of period	$	131,508		$	101,074		$	87,606
Weighted average rate at end of period		3.95	%		4.30	%		4.37	%

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 or nine months ended September 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					Nine Months Ended
	September 30,					September 30,
(Dollars in thousands, except per share amounts)	2008		2007			2008		2007
Net income (loss)	$	66	$	(347	)	$	399	$	(1,374	)
Weighted-average shares outstanding:
Basic		5,905,927		6,438,228			5,968,648		6,442,220
Effect of dilutive stock options and restrictive stock awards		—		—			—		—
Diluted		5,905,927		6,438,228			5,968,648		6,442,220
Earnings (loss) per share:
Basic	$	0.01	$	(0.05	)	$	0.07	$	(0.21	)
Diluted	$	0.01	$	(0.05	)	$	0.07	$	(0.21	)

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				Nine Months				Year
	Ended				Ended				Ended
	September 30,				September 30,				December 31,
(Dollars in thousands)	2008		2007		2008		2007		2007
Insurance commissions	$	373	$	397	$	1,486	$	1,328	$	1,639
Income before income tax expense		50		129		531		469		472

	September 30,				December 31,
	2008		2007		2007
Total assets	$	1,242	$	1,167	$	1,258

Note 9. Stock Based Compensation

On May 24, 2006, FedFirst Financial Corporation’s stockholders approved the 2006 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to promote the Company’s success and enhance its value by linking the personal interests of its employees, officers, directors and directors emeritus to those of the Company’s stockholders, and by providing participants with an incentive for outstanding performance. All of the Company’s salaried employees, officers and directors are eligible to participate in the Plan. The Plan authorizes the granting of options to purchase shares of the Company’s stock, which may be non-statutory stock options or incentive stock options, and restricted stock which is subject to restrictions on transferability and subject to forfeiture. The Plan reserved an aggregate number of 453,617 shares of which 324,012 may be issued in connection with the exercise of stock options and 129,605 may be issued as restricted stock.

On August 8, 2008, a non-employee director was granted 2,000 restricted shares of common stock and 5,000 options to purchase shares of common stock. In addition, on the same date, certain officers and key employees of the Company were awarded an aggregate of 15,000 restricted shares of common stock and 30,000 options to purchase shares of common stock. The Company’s common stock closed at $6.70 per share on August 8, 2008, which is the exercise price of the options granted on that date. The market value of the restricted stock awards was approximately $113,900, before the impact of income taxes. The estimated value

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of the stock options was $100,100, before the impact of income taxes. The per share weighted-average fair value of stock options granted with an exercise price equal to the market value on August 8, 2008 was $2.86, using the Black-Scholes-Merton option pricing model with the following assumptions: expected life of 7 years, expected dividend rate of 0%, risk-free interest rate of 3.94% and an expected volatility of 32.56%, based on historical results. The Company uses the simplified method because it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its shares have been publicly traded.

The Company recognizes expense associated with the awards over the five-year vesting period in accordance with SFAS No. 123(R), Share-Based Payment. Compensation expense was $94,000 for the three months ended September 30, 2008 compared to $79,000 for the three months ended September 30, 2007. For the nine months ended September 30, 2008, compensation expense was $267,000 compared to $246,000 for the nine months ended September 30, 2007. As of September 30, 2008, there was $1.2 million of total unrecognized compensation cost related to nonvested stock-based compensation compared to $1.3 million at December 31, 2007. The compensation expense cost at September 30, 2008 is expected to be recognized ratably over the remaining service period of 3.23 years. There is no intrinsic value for stock options at September 30, 2008.

			Stock Options
			Weighted		Weighted
	Number		Average		Average
	of		Exercise		Remaining
Stock-Based Compensation	Shares		Price		Term
Outstanding at January 1, 2008		239,500	$	10.05		8.80
Granted		35,000		6.70
Exercised or converted		—		—
Forfeited		—		—
Expired		—		—
Outstanding at September 30, 2008		274,500	$	9.62		8.05
Exercisable at September 30, 2008		93,300	$	10.08		7.78

	Stock Options				Restricted Stock Awards
	Number of		Fair-Value		Number of		Fair-Value
	Shares		Price		Shares		Price
Nonvested at January 1, 2008		194,100	$	3.14		79,100	$	10.03
Granted		35,000		2.86		17,000		6.70
Vested		47,900		3.14		19,500		10.05
Forfeited		—		—		—		—
Nonvested at September 30, 2008		181,200	$	3.09		76,600	$	9.29

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

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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 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 September 30, 2008 were $350.1 million, an increase of $44.8 million, or 14.7%, from total assets of $305.3 million at December 31, 2007.

Securities available-for-sale increased $2.8  million, or 3.2%, to $91.9 million at September 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 of $8.8 million in Government-sponsored enterprise securities and $13.0 million in calls and paydowns. In addition, the securities portfolio reflects an unrealized loss of $4.1 million at September 30, 2008, primarily from corporate debt and REMIC securities, compared to $115,000 at December 31, 2007.

Loans, net, increased $37.5 million, or 20.0%, to $225.5 million at September 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, commercial business, and home equity loans partially offset by payoffs of multi-family loans.

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Real estate owned decreased $445,000 to $674,000 at September 30, 2008 compared to $1.1 million at December 31, 2007. We transferred into real estate owned two one-to-four family residential real estate properties valued at $260,000 and sold two properties for $686,000. A $177,000 payment for one of the properties was not yet received and was being held as a receivable as of September 30, 2008. As part of taking possession of these properties, the Company has recorded $313,000 in charge-offs.

Liabilities.Total liabilities at September 30, 2008 were $309.6 million, compared to $261.4 million at December 31, 2007, an increase of $48.1 million, or 18.4%.

Total deposits increased $17.5 million, or 11.3%, to $173.1 million at September 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 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 $30.4 million, or 30.1%, to $131.5 million at September 30, 2008 compared to $101.1 million at December 31, 2007. We utilized borrowings to fund loan growth.

Stockholders’ Equity.Stockholders’ equity was $40.5 million at September 30, 2008, a decrease of $3.3 million from December 31, 2007. The decrease in stockholders’ equity was primarily due to the $2.4 million change in the unrealized loss position of the securities portfolio, net of tax, the repurchase of $1.2 million 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 $399,000 for the nine months ended September 30, 2008.

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

Overview.The Company had net income of $66,000 for the three months ended September 30, 2008, compared to a net loss of $347,000 for the same period in 2007.

	Three Months Ended
	September 30,
(Dollars in thousands)	2008			2007
Net income (loss)	$	66		$	(347	)
Return on average assets		0.08	%		(0.49	)%
Return on average equity		0.65			(3.07	)
Average equity to average assets		11.81			16.03

Net Interest Income.Net interest income for the three months ended September 30, 2008 increased $531,000 to $2.2 million compared to the three months ended September 30, 2007. Interest rate spread and net interest margin were 2.23% and 2.66%, respectively, for the three months ended September 30, 2008 compared to 1.90% and 2.50%, respectively, for the three months ended September 30, 2007. The improvement in interest rate spread and net interest margin is primarily attributed to the growth in the loan and securities portfolio coupled with lower costs on deposits and borrowings.

Interest income increased $777,000, or 20.3%, to $4.6 million for the three months ended September 30, 2008 compared to the three months ended September 30, 2007 due to an increase of $63.5 million in the average balance of interest-earning assets partially offset by a decrease of 17 basis points in the average yield. Interest income on loans increased $529,000 due to an increase of $34.6 million in the average balance, primarily driven by increases in one-to-four family residential real estate, commercial real estate, commercial business, and home equity loans. Interest income on securities increased $310,000 due to an increase of $27.0 million in the average balance, primarily from purchases of mortgage-backed securities in March 2008.

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Interest expense increased $246,000, or 11.3%, to $2.4 million for the three months ended September 30, 2008 as compared to the three months ended September 30, 2007. Interest expense on deposits decreased $223,000 due to a decrease of 78 basis points in cost related to the repricing of money market accounts and maturing certificates of deposits at lower rates, partially offset by an increase of $9.0 million in the average balance, primarily in money market accounts. Interest expense on borrowings increased $469,000 due to an increase of $52.7 million in the average balance, partially offset by a decrease of 31 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 September 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)	$	218,341	$	3,218		5.90	%	$	183,778	$	2,689		5.85	%
Securities(3)		98,410		1,315		5.34			71,401		1,005		5.63
Other interest-earning assets		10,864		69		2.54			8,904		131		5.88
Total interest-earning assets		327,615	$	4,602		5.62			264,083	$	3,825		5.79
Noninterest-earning assets		16,201							17,613
Total assets	$	343,816						$	281,696
Liabilities and Stockholders’ equity:
Interest-bearing liablities:
Interest-bearing demand deposits	$	11,871	$	14		0.47	%	$	13,060	$	16		0.49	%
Savings accounts		23,787		45		0.76			24,712		62		1.00
Money market accounts		37,429		296		3.16			13,137		138		4.20
Certificates of deposit		85,208		794		3.73			98,347		1,156		4.70
Total interest-bearing deposits		158,295		1,149		2.90			149,256		1,372		3.68
Borrowings		127,254		1,273		4.00			74,549		804		4.31
Total interest-bearing liabilities		285,549		2,422		3.39			223,805		2,176		3.89
Noninterest-bearing liabilities		17,672							12,737
Total liabilities		303,221							236,542
Stockholders’ equity		40,595							45,154
Total liabilities and stockholders’ equity	$	343,816						$	281,696
Net interest income			$	2,180						$	1,649
Interest rate spread(4)						2.23	%						1.90	%
Net interest margin(5)						2.66							2.50
Average interest-earning assets to average interest-bearing liablities						114.73	%						118.00	%

(1)	Amount is net of deferred loan costs, loans in process and 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 September 30, 2008
			Compared To
	Three Months Ended September 30, 2007
			Increase (decrease) due to
(Dollars in thousands)	Volume		Rate			Total
Interest and dividend income:
Loans, net	$	506	$	23		$	529
Securities		364		(54	)		310
Other interest-earning assets		23		(85	)		(62	)
Total interest-earning assets		893		(116	)		777
Interest expense:
Deposits		82		(305	)		(223	)
Borrowings		531		(62	)		469
Total interest-bearing liablities		613		(367	)		246
Change in net interest income	$	280	$	251		$	531

Provision for Loan Losses.The provision for loan losses was $260,000 for the three months ended September 30, 2008 compared to $395,000 for the three months ended September 30, 2007. The decrease in the provision is primarily related to a decline in charge-offs in the current period. Net charge-offs were $130,000 for the three months ended September 30, 2008 compared to $318,000 for the three months ended September 30, 2007. The current period charge-off was related to a one-to-four family residential real estate loan that was transferred into real estate owned. Included in the prior period is a $310,000 charge-off as a result of the Company taking possession of two multi-family loans in our purchased secondary market mortgage portfolio. Also contributing to the provision was growth in the loan portfolio, predominantly in one-to-four family, commercial, and home equity loans.

Noninterest Income.Noninterest income increased $7,000 or 1.2%, to $582,000 for the three months ended September 30, 2008 compared to $575,000 for the three months ended September 30, 2007.

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

	Three Months Ended
	September 30,
(Dollars in thousands)	2008		2007
Compensation and employee benefits	$	1,373	$	1,463
Occupancy		328		301
FDIC insurance premiums		9		6
Data processing		104		94
Advertising		22		45
Professional services		146		129
Stationary, printing and supplies		27		32
Telephone		13		13
Postage		31		29
Correspondent bank fees		38		31
Real estate owned expense		114		—
All other		175		183
Total noninterest expense	$	2,380	$	2,326

Noninterest expense increased $54,000, or 2.3%, for the three months ended September 30, 2008 compared to the three months ended September 30, 2007.

Income Tax (Benefit) Expense.Income tax expense for the three months ended September 30, 2008 was $51,000 compared to an income tax benefit of $165,000 for the same period in 2007.

Results of Operations for the Nine Months Ended September 30, 2008 and 2007

Overview.The Company had net income of $399,000 for the nine months ended September 30, 2008 compared to a net loss of $1.4 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 2007.

	Nine Months Ended
	September 30,
(Dollars in thousands)	2008			2007
Net income (loss)	$	399		$	(1,374	)
Return on average assets		0.16	%		(0.65	)%
Return on average equity		1.26			(4.00	)
Average equity to average assets		12.70			16.30

Net Interest Income.Net interest income for the nine months ended September 30, 2008 increased $1.2 million to $6.1 million compared to $4.8 million for the nine months ended September 30, 2007. Interest rate spread and net interest margin were 2.11% and 2.57%, respectively, for the nine months ended September 30, 2008 compared to 1.86% and 2.43%, respectively, for the nine months ended September 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 purchase mortgage-backed securities improved the overall yield on securities. Despite growth in deposits and borrowings, the Company’s maturing short-term certificates of deposits and borrowings repriced at lower interest rates, which helped to improve the net interest spread and net interest margin.

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Interest income increased $2.1 million, or 18.7%, to $13.3 million for the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007 due to an increase in the average balance of interest-earning assets of $50.3 million. Interest income on loans increased $1.2 million due to increases of $24.6 million in the average balance, primarily driven by one-to-four family residential, commercial, and home equity loans. Interest income on securities increased $1.1 million due to an increase of $23.9 million in the average balance and 17 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 $846,000, or 13.3%, for the nine months ended September 30, 2008 as compared to the nine months ended September 30, 2007. Interest expense on deposits decreased $101,000 due to a decrease of 36 basis points in cost partially offset by an increase of $12.5 million in the average balance. 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 $947,000 due to an increase of $36.9 million in the average balance partially offset by a decrease of 28 basis points in cost. The Company has utilized borrowings to fund loan growth.

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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).

	Nine Months Ended September 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)	$	203,051	$	8,937		5.87	%	$	178,462	$	7,764		5.80	%
Securities(3)		99,671		4,074		5.45			75,742		2,999		5.28
Other interest-earning assets		11,227		252		2.99			9,459		408		5.75
Total interest-earning assets		313,949	$	13,263		5.63			263,663	$	11,171		5.65
Noninterest-earning assets		17,873							17,272
Total assets	$	331,822						$	280,935
Liabilities and Stockholders’ equity:
Interest-bearing liablities:
Interest-bearing demand deposits	$	11,900	$	42		0.47	%	$	13,065	$	47		0.48	%
Savings accounts		23,495		140		0.79			25,452		191		1.00
Money market accounts		26,853		640		3.18			10,984		325		3.95
Certificates of deposit		93,970		2,866		4.07			94,229		3,226		4.56
Total interest-bearing deposits		156,218		3,688		3.15			143,730		3,789		3.51
Borrowings		116,812		3,516		4.01			79,926		2,569		4.29
Total interest-bearing liabilities		273,030		7,204		3.52			223,656		6,358		3.79
Noninterest-bearing liabilities		16,645							11,477
Total liabilities		289,675							235,133
Stockholders’ equity:		42,147							45,802
Total liabilities and stockholders’ equity	$	331,822						$	280,935
Net interest income			$	6,059						$	4,813
Interest rate spread(4)						2.11	%						1.86	%
Net interest margin(5)						2.57							2.43
Average interest-earning assets to average interest-bearing liablities						114.99	%						117.89	%

(1)	Amount is net of deferred loan costs, loans in process and 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.

	Nine Months Ended September 30, 2008
			Compared To
	Nine Months Ended September 30, 2007
			Increase (decrease) due to
(Dollars in thousands)	Volume		Rate			Total
Interest and dividend income:
Loans, net	$	1,078	$	95		$	1,173
Securities		975		100			1,075
Other interest-earning assets		67		(223	)		(156	)
Total interest-earning assets		2,120		(28	)		2,092
Interest expense:
Deposits		313		(414	)		(101	)
Borrowings		1,125		(178	)		947
Total interest-bearing liablities		1,438		(592	)		846
Change in net interest income	$	682	$	564		$	1,246

Provision for Loan Losses.The provision for loan losses was $539,000 for the nine months ended September 30, 2008 compared to $470,000 for the nine months ended September 30, 2007. Charge-offs in the current period contributed to the increase in the provision. Net charge-offs were $350,000 for the nine months ended September 30, 2008 compared to $318,000 for the nine months ended September 30, 2007. The current period charge-offs were primarily related to two one-to-four family residential real estate loans that were transferred into real estate owned. Included in the prior period was a $310,000 charge-off as a result of the Company taking possession of two multi-family loans in our purchased secondary market mortgage portfolio. Also contributing to the provision was growth in the loan portfolio, predominantly in one-to-four family, commercial, and home equity loans.

Noninterest Income.Noninterest income increased $1.8 million to $2.2 million for the nine months ended September 30, 2008 compared to $441,000 for the nine months ended September 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 $158,000 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.

	Nine Months Ended
	September 30,
(Dollars in thousands)	2008		2007
Compensation and employee benefits	$	4,147	$	4,239
Occupancy		987		832
FDIC insurance premiums		20		17
Data processing		315		279
Advertising		92		118
Professional services		415		413
Stationary, printing and supplies		84		97
Telephone		45		40
Postage		102		94
Correspondent bank fees		117		92
Real estate owned expense		114		—
All other		532		524
Total noninterest expense	$	6,970	$	6,745

Noninterest expense increased $225,000, or 3.3%, for the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007. The increase is primarily related to increased occupancy costs for the nine months ended September 30, 2008 in connection with the opening of the Washington office in June 2007. In addition, the Company incurred $114,000 in real estate owned expenses in the current period.

Income Tax (Benefit) Expense.Income tax expense for the nine months ended September 30, 2008 was $306,000 compared to an income tax benefit of $640,000 for the same period in 2007. The benefit recorded for the nine months ended September 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 September 30, 2008, cash and cash equivalents totaled $7.6 million. At September 30, 2008, securities classified as available-for-sale totaled $91.9 million, which provides an additional source of liquidity. In addition, at September 30, 2008, we had the ability to borrow approximately $199.2 million from the FHLB of Pittsburgh. On September 30, 2008, we had $126.0 million of FHLB advances outstanding and the maximum remaining borrowing capacity at the FHLB was approximately $73.2 million.

Certificates of deposit due within one year of September 30, 2008 totaled $46.7 million, or 55.4% 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

26

\

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.

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

	September 30,
(Dollars in thousands)	2008
Loans in process	$	8,214
Unused revolving lines of credit		2,801
Unused commercial business lines of credit		2,267
One-to-four family residential commitments		1,345
Consumer commitments		434
Commercial commitments		1,375
Total commitments outstanding	$	16,436

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 September 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 nine months ended September 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 September 30, 2008, that has materially affected, or is reasonably likely to materially affect, FedFirst Financial’s internal control over financial reporting.

27

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 September 30, 2008.

					Total Number of		Maximum Number
					Shares Purchased as		of Shares that May
	Total Number		Average Price		Part of the Publicly		Yet Be Purchased
	of Shares		Paid per		Announced Program		Under the Program
Period	Purchased(2)		Share		(1)		(1)
July 2008		6,434	$	6.34		6,325		121,750
August 2008		5,366		6.43		1,500		120,250
September 2008		22,000		6.07		22,000		98,250
Total		33,800		6.18		29,825

(1)

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 September 30, 2008, 41,750 shares of the Company’s common stock had been repurchased under this program.

(2)

The Company purchased 3,975 shares that were not made pursuant to a publicly announced program to satisfy the Company’s obligation to purchase shares from participants in the Company’s Equity Incentive Plan to cover income taxes on vested shares.

Item 3. Defaults Upon Senior Securities.

Not applicable.

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

28

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)
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.

29

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: November 14, 2008	/s/ John G. Robinson
	John G. Robinson
	President and Chief Executive Officer
Date: November 14, 2008	/s/ Robert C. Barry Jr.
	Robert C. Barry Jr.
	Chief Financial Officer and Senior Vice President
	(Principal Financial Officer and Chief Accounting Officer)

30