Fedfirst Financial 10-Q 2009 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2009

OR

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

For the transition period from __________ to __________

Commission file number: 0-51153

FEDFIRST FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

United States	25-1828028
(State or other jurisdiction of incorporation or organization)	(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 T     No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes £    No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	£	Accelerated filer	£
Non-accelerated filer (Do not check if a smaller reporting company)	£	Smaller reporting company	T

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

As of November 13, 2009, the issuer had 6,326,472 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, 2009 (Unaudited) and December 31, 2008	1
Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2009 and 2008	2
Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive Income (Loss) for the Nine Months Ended September 30, 2009 and 2008 (Unaudited)	3
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008 (Unaudited)	5
Notes to the Unaudited Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	23
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	34
Item 4T. Controls and Procedures.	35
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.	35
Item 1A. Risk Factors.	35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	36
Item 3. Defaults Upon Senior Securities.	36
Item 4. Submission of Matters to a Vote of Security Holders.	36
Item 5. Other Information.	36
Item 6. Exhibits.	37
SIGNATURES	38

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	September 30,			December 31,
	2009			2008
(Dollars in thousands, except share data)	(UNAUDITED)
Assets:
Cash and cash equivalents:
Cash and due from banks	$	1,560		$	2,224
Interest-earning deposits		4,703			5,623
Total cash and cash equivalents		6,263			7,847
Securities available-for-sale		81,943			85,433
Loans, net		241,001			230,184
Federal Home Loan Bank ("FHLB") stock, at cost		6,901			6,901
Accrued interest receivable - loans		1,144			1,147
Accrued interest receivable - securities		452			505
Premises and equipment, net		2,523			2,735
Bank-owned life insurance		7,641			7,431
Goodwill		1,080			1,080
Real estate owned		386			295
Deferred tax assets		3,595			4,930
Other assets		694			1,273
Total assets	$	353,623		$	349,761
Liabilities and Stockholders' Equity:
Deposits:
Noninterest-bearing		14,583			12,005
Interest-bearing		173,871			160,799
Total deposits		188,454			172,804
Borrowings		118,773			132,410
Advance payments by borrowers for taxes and insurance		241			474
Accrued interest payable - deposits		440			743
Accrued interest payable - borrowings		437			546
Other liabilities		3,306			3,360
Total liabilities		311,651			310,337
Stockholders' equity
FedFirst Financial Corporation 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 6,326,472 and 6,351,775 shares outstanding		67			67
Additional paid-in-capital		29,511			29,291
Retained earnings - substantially restricted		17,534			15,930
Accumulated other comprehensive loss, net of deferred taxes of
$(220) and $(716)		(341	)		(1,111	)
Unearned Employee Stock Ownership Plan ("ESOP")		(1,771	)		(1,901	)
Common stock held in treasury, at cost (381,028 and 355,725 shares)		(3,113	)		(2,955	)
Total FedFirst Financial Corporation stockholders' equity		41,887			39,321
Noncontrolling interest in subsidiary		85			103
Total stockholders' equity		41,972			39,424
Total liabilities and stockholders' equity	$	353,623		$	349,761

See Notes to the Unaudited Consolidated Financial Statements.

1

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)	2009		2008		2009		2008
Interest income:
Loans	$	3,494	$	3,218	$	10,226	$	8,937
Securities		1,012		1,315		3,323		4,074
Other interest-earning assets		3		69		14		252
Total interest income		4,509		4,602		13,563		13,263
Interest expense:
Deposits		987		1,149		3,141		3,688
Borrowings		1,109		1,273		3,523		3,516
Total interest expense		2,096		2,422		6,664		7,204
Net interest income		2,413		2,180		6,899		6,059
Provision for loan losses		300		260		690		539
Net interest income after provision for loan losses		2,113		1,920		6,209		5,520
Noninterest income:
Fees and service charges		147		132		413		352
Insurance commissions		482		373		1,778		1,486
Income from bank-owned life insurance		71		67		216		203
Net gain on sales of available-for-sale securities		-		-		73		156
Gain on sales of real estate owned		-		3		9		-
Other		6		7		17		19
Total noninterest income		706		582		2,506		2,216
Noninterest expense:
Compensation and employee benefits		1,471		1,373		4,393		4,147
Occupancy		359		328		1,057		987
FDIC insurance premiums		111		9		459		20
Data processing		114		104		331		315
Professional services		177		145		489		414
Other		425		421		1,137		1,087
Total noninterest expense		2,657		2,380		7,866		6,970
Income before income tax expense and noncontrolling interest
in net income of consolidated subsidiary		162		122		849		766
Income tax expense		57		51		320		306
Net income before noncontrolling interest in net income
of consolidated subsidiary		105		71		529		460
Noncontrolling interest in net income of consolidated subsidiary		-		5		57		61
Net income of FedFirst Financial Corporation	$	105	$	66	$	472	$	399
Earnings per share:
Basic and diluted	$	0.02	$	0.01	$	0.08	$	0.07
Weighted-average shares outstanding:
Basic and diluted		6,103,999		5,905,927		6,078,456		5,968,648

 

See Notes to the Unaudited Consolidated Financial Statements.

2

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND
COMPREHENSIVE INCOME (LOSS) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(UNAUDITED)

									Accumulated						Common
			Additional						Other						Stock			Noncontrolling			Total
	Common		Paid-in-			Retained			Comprehensive			Unearned			Held in			Interest in			Stockholders'			Comprehensive
(Dollars in thousands)	Stock		Capital			Earnings			Loss			ESOP			Treasury			Subsidiary			Equity			Income (Loss)
Balance at January 1, 2008	$	67	$	29,084		$	18,520		$	(70	)	$	(2,074	)	$	(1,754	)	$	80		$	43,853
Comprehensive income (loss):
Net income		-		-			399			-			-			-			61			460		$	460
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 $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			-			-
Distribution to noncontrolling shareholder		-		-			-			-			-			-			(52	)		(52	)
Total comprehensive loss																									(1,971	)
Less: Comprehensive income attributable
to the noncontrolling interest
in subsidiary																									61
Comprehensive loss attributable
to FedFirst Financial Corporation																								$	(2,032	)
Balance at September 30, 2008	$	67	$	29,169		$	18,474		$	(2,501	)	$	(1,944	)	$	(2,799	)	$	89		$	40,555

See Notes to the Unaudited Consolidated Financial Statements.

3

								Accumulated						Common
			Additional					Other						Stock			Noncontrolling			Total
	Common		Paid-in-			Retained		Comprehensive			Unearned			Held in			Interest in			Stockholders'			Comprehensive
	Stock		Capital			Earnings		Gain (Loss)			ESOP			Treasury			Subsidiary			Equity			Income (Loss)
Balance at January 1, 2009	$	67	$	29,291		$	15,930	$	(1,111	)	$	(1,901	)	$	(2,955	)	$	103		$	39,424
Cumulative effect adjustment as of
April 1, 2009 relating to ASC
320-10-35, net of tax of $584		-		-			1,132		(1,132	)		-			-			-			-
Comprehensive income (loss):
Net income		-		-			472		-			-			-			57			529		$	529
Unrealized gain on securities
available-for-sale,
net of tax of $1,237		-		-			-		1,919			-			-			-			1,919			1,919
Reclassification adjustment
on sales of securities
available-for-sale,
net of tax of $11		-		-			-		(17	)		-			-			-			(17	)		(17	)
Purchase of common stock to be
held in treasury (18,303 shares)		-		-			-		-			-			(77	)		-			(77	)
ESOP shares committed to be
released (12,961 shares)		-		(82	)		-		-			130			-			-			48
Stock-based compensation expense		-		221			-		-			-			-			-			221
Stock awards granted		-		(41	)		-		-			-			41			-			-
Stock awards forfeited		-		122			-		-			-			(122	)		-			-
Distribution to noncontrolling shareholder		-		-			-		-			-			-			(75	)		(75	)
Total comprehensive income																								2,431
Less: Comprehensive income attributable
to the noncontrolling interest
in subsidiary																								57
Comprehensive income attributable
to FedFirst Financial Corporation																							$	2,374
Balance at September 30, 2009	$	67	$	29,511		$	17,534	$	(341	)	$	(1,771	)	$	(3,113	)	$	85		$	41,972

See Notes to the Unaudited Consolidated Financial Statements.

4

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Nine Months
	Ended September 30,
(Dollars in thousands)	2009			2008
Cash flows from operating activities:
Net income of FedFirst Financial Corporation	$	472		$	399
Adjustments to reconcile net income to net cash provided by operating activities:
Noncontrolling interest in net income of consolidated subsidiary		57			61
Provision for loan losses		690			539
Depreciation		418			376
Amortization of intangibles		68			-
Net gain on sales of securities		(73	)		(156	)
Net gain on sales of real estate owned		(9	)		-
Net accretion (amortization) of security premiums and loan costs		156			(379	)
Noncash expense for ESOP		48			97
Noncash expense for stock-based compensation		221			267
Noncash benefit plan reserve		-			445
Increase in bank-owned life insurance		(216	)		(203	)
Decrease in other assets		1,231			36
(Decrease) increase in other liabilities		(411	)		34
Net cash provided by operating activities		2,652			1,516
Cash flows from investing activities:
Net loan originations		(11,619	)		(38,066	)
Proceeds from maturities of and principal repayments of
securities available-for-sale		20,272			12,955
Proceeds from sales of securities available-for-sale		4,094			8,766
Purchases of securities available-for-sale		(17,973	)		(28,352	)
Purchases of premises and equipment		(206	)		(220	)
Acquisition of Allsurance Insurance Agency		(525	)		-
Increase in FHLB stock, at cost		-			(1,552	)
Proceeds from sales of real estate owned		18			509
Net cash used in investing activities		(5,939	)		(45,960	)
Cash flows from financing activities:
Net increase (decrease) in short-term borrowings		2,500			(10,200	)
Proceeds from long-term borrowings		17,100			57,499
Repayments of long-term borrowings		(33,237	)		(16,865	)
Net increase in deposits		15,650			17,527
Decrease in advance payments by borrowers for taxes and insurance		(233	)		(226	)
Purchases of common stock held in treasury		(77	)		(1,194	)
Net cash provided by financing activities		1,703			46,541
Net (decrease) increase in cash and cash equivalents		(1,584	)		2,097
Cash and cash equivalents, beginning of period		7,847			5,552
Cash and cash equivalents, end of period	$	6,263		$	7,649
Supplemental cash flow information:
Cash paid for:
Interest on deposits and borrowings	$	7,076		$	7,291
Income tax expense		169			44
Real estate acquired in settlement of loans		109			360

See Notes to the Unaudited Consolidated Financial Statements.

5

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 subsidiary is First Federal Savings Bank (the “Bank”), a federally chartered stock savings bank, which owns 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, life, health, commercial general 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. In March 2009, Exchange Underwriters, Inc. expanded its operation through the acquisition of the Allsurance Insurance Agency (“Allsurance”), which is a full service independent insurance agency that offers life, health and property and casualty insurance for individuals and small businesses. The total acquisition cost recorded for Allsurance was $525,000, which included $500,000 of intangible assets related to a non-compete agreement and customer list and $25,000 of fixed assets. The intangible assets will be amortized on a straight-line basis over 4 and 5 years, respectively. Approximately $200,000 of the purchase price, net of cash, will be paid quarterly over the next 2 years. 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, 2008. 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, 2009 are not necessarily indicative of the results that may be expected for the full year or any other interim period. In connection with the preparation of these financial statements, the Company has evaluated events and transactions for items that should potentially be recognized or disclosed through November 13, 2009, which is the date the financial statements were issued. 

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 including related cash flow projections, goodwill impairment, and the valuation of deferred tax assets.

Note 2.  Recent Accounting Pronouncements

Accounting Standards Update (“ASU”) No. 2009-01, Generally Accepted Accounting Principles (Topic 105) – amendments based on Statement of Financial Accounting Standards No. 168 – The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles.  This ASU, published in July 2009, amends the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for the issuance of FASB Statement of Financial Accounting Standard (“SFAS”) No. 168. This ASU includes SFAS No. 168 in its entirety, including the accounting standards update instructions contained in Appendix B of the Statement. In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles. This statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. The FASB ASC became the source of authoritative GAAP for financial statements issued for interim and annual periods ending after September 15, 2009. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On September 15, 2009, all then-existing non-SEC accounting and reporting standards were superseded and all nongrandfathered, non-SEC accounting literature not included in the ASC was deemed nonauthoritative. The issuance of this ASU and the ASC did not change GAAP and therefore did not have an impact on the Company’s financial position or results of operation upon adoption on September 15, 2009.

6

FASB no longer issues new standards in the form of Statements, FASB Staff Positions (“FSP”), or Emerging Issues Task Force Abstracts. Instead, it issues ASUs. FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the ASC, provide background information about the guidance, and provide the bases for conclusions on the change(s) in the ASC.

ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820) – Measuring Liabilities at Fair Value. This ASU amends FASB ASC 820-10, Fair Value Measurements and Disclosures, to provide guidance on the fair value measurement of liabilities within the scope of ASC 820. The ASU states that if a quoted price in an active market for the identical liability is available, it represents a Level 1 fair value measurement. In circumstances in which a quoted price in an active market for an identical liability is not available, a reporting entity must measure fair value using one or more of the following techniques:

·   A valuation technique that uses the quoted price of the identical liability when traded as an asset

·   A valuation technique that uses the quoted price for similar liabilities when traded as assets

·   Another valuation technique that is consistent with the principles of Topic 820, such as an income approach or a market approach.

This ASU was effective for the first reporting period beginning after August 28, 2009 and did not have a material impact on the Company’s financial condition or results of operation.

7

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).

September 30, 2009	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Government-Sponsored Enterprises	$	5,953	$	9	$	146	$	5,816
Municipal bonds		4,015		288		-		4,303
Mortgage-backed		37,209		1,399		6		38,602
REMICs		31,283		1,280		1,049		31,514
Corporate debt		3,995		-		2,336		1,659
Equities		49		-		-		49
Total securities available-for-sale	$	82,504	$	2,976	$	3,537	$	81,943
December 31, 2008
Government-Sponsored Enterprises	$	9,267	$	99	$	-	$	9,366
Mortgage-backed		41,359		708		87		41,980
REMICs		32,590		318		525		32,383
Corporate debt		3,995		-		2,340		1,655
Equities		49		-		-		49
Total securities available-for-sale	$	87,260	$	1,125	$	2,952	$	85,433

The amortized cost and fair value of securities at September 30, 2009 by contractual maturity were as follows. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

	Amortized		Fair
(Dollars in thousands)	Cost		Value
Due in one year or less	$	-	$	-
Due from one to five years		2,094		2,167
Due from five to ten years		10,604		10,886
Due after ten years		69,757		68,841
No scheduled maturity		49		49
Total	$	82,504	$	81,943

8

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
September 30, 2009	Number of Securities		Fair Value		Gross Unrealized Losses		Number of Securities		Fair Value		Gross Unrealized Losses		Number of Securities		Fair Value		Gross Unrealized Losses
Government-sponsored enterprises		1	$	2,854	$	146		-	$	-	$	-		1	$	2,854	$	146
Mortgage-backed		16		2,309		5		4		54		1		20		2,363		6
REMICs:
Private label issuer:
Prime fixed and adjustable rate		-		-		-		3		1,027		36		3		1,027		36
Alt-A fixed rate		7		4,555		984		1		814		12		8		5,369		996
Government-sponsored enterprises		3		1,216		12		1		264		5		4		1,480		17
Total REMICs		10		5,771		996		5		2,105		53		15		7,876		1,049
Corporate debt		-		-		-		3		1,659		2,336		3		1,659		2,336
Total securities temporarily impaired		27	$	10,934	$	1,147		12	$	3,818	$	2,390		39	$	14,752	$	3,537

	Less than 12 months						12 months or more						Total
December 31, 2008	Number of Securities		Fair Value		Gross Unrealized Losses		Number of Securities		Fair Value		Gross Unrealized Losses		Number of Securities		Fair Value		Gross Unrealized Losses
Mortgage-backed		71	$	9,052	$	86		2	$	14	$	1		73	$	9,066	$	87
REMICs:
Private label issuer:
Prime fixed and adjustable rate		3		1,277		137		2		710		185		5		1,987		322
Alt-A fixed rate		1		894		23		-		-		-		1		894		23
Government-sponsored enterprises		7		3,406		180		-		-		-		7		3,406		180
Total REMICs		11		5,577		340		2		710		185		13		6,287		525
Corporate debt		-		-		-		3		1,655		2,340		3		1,655		2,340
Total securities temporarily impaired		82	$	14,629	$	426		7	$	2,379	$	2,526		89	$	17,008	$	2,952

As part of the Company’s review of its available-for-sale securities at December 31, 2008, it was determined that 11 private label mortgage-backed securities for vintages 2005 through 2007 with an unrealized loss of $4.8 million had other-than-temporary impairment (“OTTI”). Of these securities, 9 were significantly downgraded by the rating agencies in December 2008 with all but one accorded below investment grade status. In addition to the decrease in fair market value, the underlying assets reflected further deterioration with respect to delinquencies, foreclosures and payment speed which identified a potential loss of principal based on cash flow analysis.

In the second quarter of 2009, the Company adopted ASC 320-10-35-33A through 35A (“ASC 320-10”), Recognition and Presentation of Other-Than-Temporary Impairment, which requires the recognition of credit-related OTTI on debt securities in earnings while noncredit-related OTTI on debt securities not expected to be sold is recognized in accumulated other comprehensive income (“OCI”). ASC 320-10 requires the Company to assess whether the credit loss existed by considering whether (a) the Company has the intent to sell the security, (b) it is more likely than not that it will be required to sell the security before recovery, or (c) it does not expect to recover the entire amortized cost basis of the security. The guidance allows the Company to bifurcate the OTTI on securities not expected to be sold or where the entire amortized cost of the security is not expected to be recovered into the components representing credit loss and the component representing loss related to other factors. The portion of the fair value decline attributable to credit loss must be recognized through earnings.

9

In accordance with the guidance, the Company evaluated the previously recognized $4.8 million of OTTI charges for private label mortgage-backed securities. The Company determined that $3.1 million of the OTTI charges were credit-related and $1.7 million of the OTTI charges were noncredit-related. (To determine the credit-related loss, the Company utilized the process as noted in the section on Private Label – REMICS).  Since we do not expect to sell these securities and it is more likely than not that we will not be required to sell the securities before recovery of their amortized cost basis, the Company recorded a $1.1 million increase to retained earnings (net of $584,000 of taxes) and a corresponding increase to accumulated other comprehensive loss (“OCL”) as the cumulative effect adjustment for the noncredit-related portion at April 1, 2009.

The Company reviews its investment portfolio on a quarterly basis for indications of impairment. This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, the financial condition and near-term prospects of the issuer including any specific events that may influence the operations of the issuer, and the intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in the market.  

Other Securities – This category includes Government-Sponsored Enterprises (“GSE”), municipal bonds, mortgage-backed and GSE - REMICS. At September 30, 2009, the Company had a total of 25 securities with an unrealized loss of $169,000 in these categories. Of this total, 20 securities with an unrealized loss of $163,000 were in a loss position for less than 12 months. An evaluation of the individual securities was performed whereby we reviewed all credit ratings and noted all remain at investment grade. Additionally, all securities are issued and backed by a Government-Sponsored Enterprise (“FNMA”, “FHLMC”). The Company believes the unrealized losses are due to changes in market interest rates. The Company does not intend to sell the securities and it is more likely than not it will not be required to sell the securities before their recovery. The Company expects to recover the entire amortized cost basis of these securities and concluded that there is no OTTI on these securities.

Corporate Debt – At September 30, 2009, the Company had three securities that were in an unrealized loss position for 12 months or greater at an amount of $2.3 million. These securities consist of two pools of insurance company issued preferred trust obligations. These securities were downgraded from their original rating issuance to below investment grade. The lack of liquidity in the market for this type of security, credit rating downgrades and market uncertainties are factors contributing to the unrealized losses on these securities. The following table provides additional information related to our pooled preferred trust obligations at September 30, 2009 (dollars in thousands):

Pool	Class	Tranche		Amortized Cost		Fair Value		Unrealized Loss			S&P / Fitch Rating	Current Number of Insurance Companies		Actual Deferrals and Defaults as a Percent of Current Collateral		Excess Subordination as a Percent of Current Performing Collateral
I-PreTSL 1	Mezzanine		B-3	$	1,500	$	634	$	(866	)	B+/BB		17		8.40%		6.20%
I-PreTSL 2	Mezzanine		B-3		2,495		1,025		(1,470	)	B+/BB		29		-		13.67%
				$	3,995	$	1,659	$	(2,336	)

These securities are evaluated for OTTI within the scope of ASC 325-40, Beneficial Interests in Securitized Financial Assets, by determining whether it is probable that an adverse change in estimated cash flows has occurred. Determining whether there has been an adverse change in estimated cash flows involves the calculation of the present value of remaining cash flows compared to previously projected cash flows. We consider the discounted cash flow analysis to be our primary evidence when determining whether credit-related OTTI exists. Additionally, reports are reviewed that provide information for the amount of deferral/defaults that would have to occur to prevent the tranche from collecting contractual cash flows (principal and interest). Based on the analysis performed and the fact that the Company does not expect to sell these securities and it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost basis, the Company concluded that there is no OTTI on these securities at September 30, 2009.

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Private Label – REMICS – At September 30, 2009, the Company had 11 securities with an unrealized loss of $1.0 million of which four securities with an unrealized loss of $48,000 were in a loss position for 12 months or greater and the remaining seven securities with an unrealized loss of $984,000 were in a loss position for less than 12 months. The securities consist of the following vintages that range from 2003 - 2007 as noted (dollars in thousands):

	Less than 12 months						12 months or more						Total
September 30, 2009	Number of Securities		Fair Value		Gross Unrealized Losses		Number of Securities		Fair Value		Gross Unrealized Losses		Number of Securities		Fair Value		Gross Unrealized Losses
Vintage
2003		-	$	-	$	-		3	$	1,447	$	18		3	$	1,447	$	18
2004		-		-		-		1		394		30		1		394		30
2005		1		331		98		-		-		-		1		331		98
2006		4		3,299		650		-		-		-		4		3,299		650
2007		2		925		236		-		-		-		2		925		236
Total		7	$	4,555	$	984		4	$	1,841	$	48		11	$	6,396	$	1,032

The vintages for 2005-2007 represent the majority of the unrealized loss in this category. At September 30, 2009, the credit ratings for 2003-2004 vintages were investment grade and 2005-2007 vintages were below investment grade. The increase in unrealized loss compared to December 31, 2008 was primarily the result of the adoption of ASC 320-10 pursuant to which $1.7 million of previously recognized OTTI was deemed to be noncredit-related loss and was reclassified from Retained Earnings to OCL on April 1, 2009.

The Company determined credit losses by estimating the cash flows of the individual securities based on the collateral (underlying mortgages) and taking into consideration the transaction structure, which includes any subordination or credit enhancements that exist. The model also required estimates/projections of a number of key assumptions, which include prepayment rates, loss severity and default rates.

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To determine estimates for the key assumptions we reviewed the historical performance of each security in the context of the uncertain economic environment. Specific details of the collateral (underlying mortgages) and whether there were any characteristics between securities that could provide insight into future performance were evaluated. Our review of historical performance focused on loss severities, default rates, delinquencies and foreclosure percentages. We reviewed the individual securities and the composition of collateral, which included types of loans (fixed, interest only), term (30 year, 10 year interest only), geographic concentrations (California and Florida), loan-to-value ratios (average 70%), and FICO scores (average 700). Based on this information we were able to compile key assumptions and perform cash modeling to determine potential impairment. These assumptions were utilized in determination of credit losses for adoption of ASC 320-10. We understand these are estimates and are highly subjective. If conditions deteriorate, we may incur additional OTTI. The key base assumptions are as follows and represent the ranges utilized for individual securities.

Key Assumptions	Percentage
Prepayment rate	6 CPR
Loss Severity	39 - 63%
Default	5 - 10.5%

Based upon analysis of third party provider reports and review of key assumptions on an individual security basis and the fact that we do not expect to sell these securities and it is more likely than not that we will not be required to sell the securities before recovery of their amortized cost basis, we concluded there is no additional OTTI on these securities at September 30, 2009.

FHLB Stock – The Company is a member of the FHLB of Pittsburgh. As a member, the Company is required to purchase and hold stock in the FHLB to satisfy membership and borrowing requirements in order to obtain low cost products and services offered by the FHLB. Unlike investment securities, FHLB stock does not provide its holders with an opportunity for appreciation because by regulation FHLB stock can only be purchased, redeemed and transferred at par value. At September 30, 2009 and December 31, 2008, the Company’s FHLB stock totaled $6.9 million.

The Company evaluates impairment in FHLB stock when certain conditions warrant further consideration. In December 2008, the FHLB voluntarily suspended dividend payments on its stock as well as the repurchase of excess stock from members. The FHLB stated that this was due to a reduction in core earnings and concern over the FHLB’s capital position. After evaluating such factors as the capital adequacy of the FHLB, its overall operating performance and the FHLB’s liquidity and funding position, the Company concluded that the par value was ultimately recoverable and no impairment charge was recognized at September 30, 2009.

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Note 4.  Loans

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

	September 30, 2009							December 31, 2008
(Dollars in thousands)	Amount			Percent				Amount			Percent
Real estate-mortgage:
One-to-four family residential	$	159,271			64.7	%		$	155,871			65.7	%
Multi-family		10,903			4.4				10,946			4.6
Commercial		32,190			13.1				24,301			10.3
Total real estate-mortgage		202,364			82.2				191,118			80.6
Real estate-construction:
Residential		3,582			1.5				9,833			4.2
Commercial		2,926			1.2				3,443			1.5
Total real estate-construction		6,508			2.7				13,276			5.7
Consumer:
Home equity		25,487			10.4				22,344			9.4
Loans on savings accounts		999			0.4				886			0.4
Home improvement		193			0.1				233			0.1
Other		1,135			0.5				588			0.2
Total consumer		27,814			11.4				24,051			10.1
							��
Commercial business		9,159			3.7				8,474			3.6
Total loans	$	245,845			100.0	%		$	236,919			100.0	%
Net premiums on loans purchased		124							120
Net deferred loan costs		843							850
Loans in process		(3,470	)						(5,899	)
Allowance for loan losses		(2,341	)						(1,806	)
Loans, net	$	241,001						$	230,184

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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,
(Dollars in thousands)	2009			2008
Nonaccrual loans:
Real estate - mortgage	$	1,416		$	632
Consumer		103			4
Total		1,519			636
Accruing loans past due 90 days or more		-			-
Total of nonaccrual and 90 days or more
past due loans (nonperforming loans)		1,519			636
Real estate owned		386			295
Total nonperforming assets	$	1,905		$	931
Troubled debt restructurings		-			-
Troubled debt restructurings and total
nonperforming assets	$	1,905		$	931
Total nonperforming loans to total loans		0.62	%		0.27	%
Total nonperforming assets to total assets		0.54			0.27

The increase in nonaccrual loans at September 30, 2009 is primarily related to two multi-family mortgage loans in our purchased secondary market mortgage portfolio with a carrying value of $765,000.

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)	2009			��	2008			2009			2008			2008
Allowance at beginning of period	$	2,147			$	1,516		$	1,806		$	1,457		$	1,457
Provision for loan losses		300				260			690			539			878
Charge-offs		(107	)			(130	)		(157	)		(350	)		(529	)
Recoveries		1				-			2			-			-
Net charge-offs		(106	)			(130	)		(155	)		(350	)		(529	)
Allowance at end of period	$	2,341			$	1,646		$	2,341		$	1,646		$	1,806

Management reviews the level of the allowance for loan losses on a quarterly basis and establishes the provision for loan losses based upon an evaluation of the portfolio, past loss experience, current economic conditions and other factors related to the collectibility of the loan portfolio. Our methodology for assessing the appropriateness of the allowance for loan losses consists of: (1) a general valuation allowance on impaired loans; and (2) a general valuation allowance on the remainder of the loan portfolio. Although we determine the amount of each element of the allowance separately, the entire allowance for loan losses is available for the entire portfolio.

General Valuation Allowance on Impaired Loans. We establish a general allowance for loans that are individually evaluated and determined to be impaired. The general allowance is determined by utilizing one of the three impairment measurement methods outlined in ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. Under ASC 310-30, a loan is impaired when, based upon current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest according to the contractual terms of the loan agreement. Management will perform individual assessments of larger impaired loans to determine the existence of loss exposure and, where applicable, the extent of loss exposure based upon the present value of expected future cash flows available to pay the loan, or based upon the estimated realizable collateral where a loan is collateral dependent. At September 30, 2009, we had no loans required to be evaluated for impairment under ASC 310-30.

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General Valuation Allowance on the Remainder of the Loan Portfolio. We establish another general allowance in accordance with ASC 450-20, Loss Contingencies, for loans that are excluded from the individual impairment analysis. Generally, these loans are collectively evaluated by management to estimate reserves for loan losses inherent in those loans. Management determines historical loss experience for each group of loans with similar risk characteristics within the portfolio based on loss experience for loans in each group. Loan categories will represent groups of loans with similar risk characteristics and may include types of loans by product, large credit exposures, concentrations, loan grade, or any other characteristic that causes a loan’s risk profile to be similar to another. We currently utilize the current year and previous two year net charge-off experience by loan category as a basis in determining loss projections. In addition, there are two categories of loans considered to be higher risk concentrations that are evaluated separately when calculating the allowance for loan losses:

·   Loans purchased in the secondary market.  Prior to September 2005, pools of multi-family and one-to-four family residential mortgage loans located in areas outside of our primary geographic lending area in southwestern Pennsylvania were acquired in the secondary market. Although these loans were underwritten to our lending standards, they are considered higher risk given our unfamiliarity with the geographic areas where the properties are located.

·   Home equity loans with a loan-to-value ratio greater than 80%. These loans are considered higher risk given the pressure on property values and reduced credit alternatives available to leveraged borrowers.

We also consider qualitative or environmental factors that are likely to cause estimated credit losses associated with the bank’s existing portfolio to differ from historical loss experience including changes in lending policies and procedures; changes in the nature and volume of the loan portfolio; changes in experience, ability and depth of loan management; changes in the volume and severity of past due loans, nonaccrual loans and adversely graded or classified loans; changes in the quality of the loan review system; changes in the value of underlying collateral for collateral dependent loans; existence of or changes in concentrations of credit; changes in economic or business conditions, and; effect of competition, legal and regulatory requirements on estimated credit losses.

Note 5.  Deposits

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

	September 30, 2009					December 31, 2008
(Dollars in thousands)	Amount		Percent			Amount		Percent
Noninterest-bearing demand deposits	$	14,583		7.7	%	$	12,005		6.9	%
Interest-bearing demand deposits		13,900		7.4			11,336		6.6
Savings accounts		22,555		12.0			22,477		13.0
Money market accounts		51,000		27.1			43,873		25.4
Certificates of deposit		86,416		45.8			83,113		48.1
Total deposits	$	188,454		100.0	%	$	172,804		100.0	%

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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 borrowings based on their stated maturities and weighted average rates for the periods indicated.

	September 30, 2009					December 31, 2008
			Weighted					Weighted
			Average					Average
(Dollars in thousands)	Balance		Rate			Balance		Rate
Due in one year or less	$	39,416		2.71	%	$	33,739		3.39	%
Due in one to two years		22,053		3.52			25,950		4.20
Due in two to three years		23,527		4.54			23,215		3.57
Due in three to four years		15,777		3.70			22,803		4.53
Due in four to five years		18,000		3.60			23,703		3.68
Due after five years		-		-			3,000		5.13
Total	$	118,773		3.49	%	$	132,410		3.87	%

The following table sets forth information concerning our borrowings for the periods indicated.

	Nine Months				Year
	Ended				Ended
	September 30,				December 31,
(Dollars in thousands)	2009				2008
Maximum amount outstanding at any month end
during the period		$	127,559			$	135,337
Average amounts outstanding during the period			120,223				120,704
Weighted average rate during the period			3.91	%			3.99	%

Note 7.  Earnings Per Share

Basic earnings per common share is calculated by dividing FedFirst Financial’s net income 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 were no dilution from stock options or awards for the three or nine months ended September 30, 2009. 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)	2009		2008		2009		2008
Net income of FedFirst Financial Corporation	$	105	$	66	$	472	$	399
Weighted-average shares outstanding:
Basic		6,103,999		5,905,927		6,078,456		5,968,648
Effect of dilutive stock options and
restrictive stock awards		-		-		-		-
Diluted		6,103,999		5,905,927		6,078,456		5,968,648
Earnings per share:
Basic and diluted	$	0.02	$	0.01	$	0.08	$	0.07

Note 8.  Fair Value Measurements and Fair Values of Financial Instruments

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of September 30, 2009 and December 31, 2008 and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to September 30, 2009 and December 31, 2008 may be different than the amounts reported at each period end.

ASC 820-10-35 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy under ASC 820-10-35 are as follows:

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.

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At September 30, 2009, Level 3 includes 11 securities with a fair value of $3.2 million. This balance is comprised of eight mortgage-backed securities with a fair value of $1.6 million and three corporate debt securities with a fair value of $1.6 million, which are pooled trust preferred insurance company 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 and currently rated B+, 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 financial services 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; therefore it was more appropriate to determine fair value using a discounted cash flow analysis. 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.

The following tables set forth the fair value hierarchy of securities at September 30, 2009 and December 31, 2008.

(Dollars in thousands)	September 30, 2009			December 31, 2008
Significant other observable inputs (Level 2)	$	78,702		$	80,062
Significant unobservable inputs (Level 3)		3,241			5,371
Total securities	$	81,943		$	85,433
	Significant
	Unobservable Inputs
(Dollars in thousands)	(Level 3)
December 31, 2008	$	5,371
Total unrealized gains		140
Paydowns and maturities		(513	)
Net transfers out of level 3		(1,757	)
September 30, 2009	$	3,241
(Dollars in thousands)	September 30, 2009			December 31, 2008
The amount of total unrealized gains (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 period indicated	$	140		$	(2,199	)

At September 30, 2009, net transfers out of level 3 is related to one security whose fair value could be derived based on market corroborated data.

The following presents the fair value of financial instruments. In cases where quoted market prices are not available, fair value is based on estimates using present value or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be sustained by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. In addition, the following information should not be interpreted as an estimate of the fair value of the Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at September 30, 2009 and December 31, 2008.

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Cash and Cash Equivalents

The carrying amounts approximate the asset’s fair values.

Securities (Including Mortgage-Backed Securities)

The fair value of securities are 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 (Level 2). 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. Alternative techniques include using a discounted cash flow model using market assumptions, which generally include cash flow, collateral and other market assumptions or obtaining fair values from pricing sources with reasonable pricing transparency, taking into account other unobservable inputs related to the risks for each issuer.

Loans

The fair values for one-to-four family residential loans are estimated using discounted cash flow analyses using mortgage commitment rates from either FNMA or FHLMC. The fair values of consumer and commercial loans are estimated using discounted cash flow analyses, using interest rates reported in various government releases. The fair values of multi-family and nonresidential mortgages are estimated using discounted cash flow analysis, using interest rates based on national commitment rates on similar loans.

Federal Home Loan Bank Stock

The carrying amount approximates the asset’s fair value.

Accrued Interest Receivable and Accrued Interest Payable

The fair value of these instruments approximates the carrying value.

Deposits

The fair values disclosed for demand deposits (eg., savings accounts) are, by definition, equal to the amount payable on demand at the repricing date (i.e., their carrying amounts).  Fair values of certificates of deposits are estimated using a discounted cash flow calculation that applies the FHLB of Pittsburgh advance yield curve to the maturity schedule of the Bank’s certificates of deposit.

Borrowings

The fair value the FHLB advances and repurchase agreements are estimated using a discounted cash flow calculation using the current FHLB advance yield curve. This is the method that the FHLB of Pittsburgh used to determine the cost of terminating the borrowing contract. The FHLB of Pittsburgh issues a valuation report for convertible select advances.

Commitments to Extend Credit

These financial instruments are generally not subject to sale and estimated fair values are not readily available. The carrying value, represented by the net deferred fee arising from the unrecognized commitment, and the fair value determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, are not considered material for disclosure purposes. The contractual amounts of unfunded commitments are presented in the Liquidity and Capital Management section of Item 2 in this report.

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The following table sets forth the carrying amount and estimated fair value of financial instruments.

(Dollars in thousands)		September 30, 2009				December 31, 2008
		Carrying		Estimated		Carrying		Estimated
		Amount		Fair Value		Amount		Fair Value
Financial assets:
	Cash and cash equivalents	$	6,263	$	6,263	$	7,847	$	7,847
	Securities		81,943		81,943		85,433		85,433
	Loans, net		241,001		246,923		230,184		235,331
	FHLB stock		6,901		6,901		6,901		6,901
	Accrued interest receivable		1,596		1,596		1,652		1,652
Financial liabilities:
	Deposits		188,454		190,454		172,804		174,565
	Borrowings		118,773		122,423		132,410		135,740
	Accrued interest payable		877		877		1,289		1,289

Note 9.  Subsidiary/Segment Reporting

The consolidated operating results of FedFirst Financial are presented as a single financial services segment. FedFirst Financial is the parent company of the Bank, which owns FFEC. FFEC has an 80% controlling interest in Exchange Underwriters, Inc. Exchange Underwriters, Inc. is managed separately from the banking and related financial services that the Company offers. Exchange Underwriters, Inc. is an independent insurance agency that offers property and casualty, life, health, commercial general liability, surety and other insurance products.

20

Following is a table of selected financial data for the Company's subsidiaries and consolidated results for the dates indicated.

(Dollars in thousands)	First Federal Savings Bank		Exchange Underwriters, Inc.		Other			Net Eliminations			Consolidated
September 30, 2009
Assets	$	353,839	$	1,419	$	39,424		$	(41,059	)	$	353,623
Liabilities		317,109		661		50			(6,169	)		311,651
Stockholders' equity		36,730		758		39,374			(34,890	)		41,972
December 31, 2008
Assets	$	350,517	$	1,338	$	39,346		$	(41,440	)	$	349,761
Liabilities		316,262		489		45			(6,459	)		310,337
Stockholders' equity		34,255		849		39,301			(34,981	)		39,424
Three Months Ended September 30, 2009
Total interest income	$	4,506	$	3	$	30		$	(30	)	$	4,509
Total interest expense		2,126		-		-			(30	)		2,096
Net interest income		2,380		3		30			-			2,413
Provision for loan losses		300		-		-			-			300
Net interest income after provision for loan losses		2,080		3		30			-			2,113
Noninterest income		225		482		-			(1	)		706
Noninterest expense		2,119		475		63			-			2,657
Undistributed net gain of subsidiary		1		-		-			(1	)		-
Income (loss) before income tax expense (benefit) and
noncontrolling interest in net income of consolidated subsidiary		187		10		(33	)		(2	)		162
Income tax expense (benefit)		59		9		(11	)		-			57
Net income (loss) before noncontrolling interest in net
income of consolidated subsidiary		128		1		(22	)		(2	)		105
Less: Noncontrolling interest in net income of
consolidated subsidiary		-		-		-			-			-
Net income (loss)	$	128	$	1	$	(22	)	$	(2	)	$	105
Nine Months Ended September 30, 2009
Total interest income	$	13,551	$	12	$	89		$	(89	)	$	13,563
Total interest expense		6,753		-		-			(89	)		6,664
Net interest income		6,798		12		89			-			6,899
Provision for loan losses		690		-		-			-			690
Net interest income after provision for loan losses		6,108		12		89			-			6,209
Noninterest income		1,011		1,778		-			(283	)		2,506
Noninterest expense		6,390		1,288		188			-			7,866
Undistributed net gain of subsidiary		285		-		-			(285	)		-
Income (loss) before income tax expense (benefit) and
noncontrolling interest in net income of consolidated subsidiary		1,014		502		(99	)		(568	)		849
Income tax expense (benefit)		130		217		(27	)		-			320
Net income (loss) before noncontrolling interest in net
income of consolidated subsidiary		884		285		(72	)		(568	)		529
Less: Noncontrolling interest in net income of
consolidated subsidiary		57		-		-			-			57
Net income (loss)	$	827	$	285	$	(72	)	$	(568	)	$	472

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(Dollars in thousands) Three Months Ended September 30, 2008	First Federal Savings Bank		Exchange Underwriters, Inc.		Other			Net Eliminations			Consolidated
Total interest income	$	4,595	$	7	$	32		$	(32	)	$	4,602
Total interest expense		2,454		-		-			(32	)		2,422
Net interest income		2,141		7		32			-			2,180
Provision for loan losses		260		-		-			-			260
Net interest income after provision for loan losses		1,881		7		32			-			1,920
Noninterest income		235		372		-			(25	)		582
Noninterest expense		1,986		330		64			-			2,380
Undistributed net gain of subsidiary		24		-		-			(24	)		-
Income (loss) before income tax expense (benefit) and
noncontrolling interest in net income of consolidated subsidiary		154		49		(32	)		(49	)		122
Income tax expense (benefit)		35		25		(10	)		-			50
Net income (loss) before noncontrolling interest in net
income of consolidated subsidiary		119		24		(22	)		(49	)		72
Less: Noncontrolling interest in net income of
consolidated subsidiary		6		-		-			-			6
Net income (loss)	$	113	$	24	$	(22	)	$	(49	)	$	66
Nine Months Ended September 30, 2008
Total interest income	$	13,239	$	24	$	304		$	(304	)	$	13,263
Total interest expense		7,299		-		-			(95	)		7,204
Net interest income		5,940		24		304			(209	)		6,059
Provision for loan losses		539		-		-			-			539
Net interest income after provision for loan losses		5,401		24		304			(209	)		5,520
Noninterest income		1,033		1,486		-			(303	)		2,216
Noninterest expense		5,813		979		178			-			6,970
Undistributed net gain of subsidiary		303		-		-			(303	)		-
Income (loss) before income tax expense (benefit) and
noncontrolling interest in net income of consolidated subsidiary		924		531		126			(815	)		766
Income tax expense (benefit)		102		228		(24	)		-			306
Net income (loss) before noncontrolling interest in net
income of consolidated subsidiary		822		303		150			(815	)		460
Less: Noncontrolling interest in net income of
consolidated subsidiary		61		-		-			-			61
Net income (loss)	$	761	$	303	$	150		$	(815	)	$	399

Note 10.  Stock Based Compensation

In 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 7, 2009, an officer of the Company was granted 5,000 restricted shares of common stock and 15,000 options to purchase shares of common stock. The Company's common stock closed at $3.10 per share on August 7, 2009, which is the exercise price of the options granted on that date. The market value of the restricted stock awards was approximately $15,500, before the impact of income taxes. The estimated value of the stock options was $24,900, 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 7, 2009 was $1.66, 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 3.5% and an expected volatility of 47.55%, 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.

22

The Company recognizes expense associated with the awards over the five-year vesting period in accordance with ASC 718 Compensation - Stock Compensation and ASC 505-50 Equity-Based Payments to Non-Employees. Compensation expense was $75,000 for the three months ended September 30, 2009 compared to $94,000 for the three months ended September 30, 2008. For the nine months ended September 30, 2009, compensation expense was $221,000 compared to $267,000 for the nine months ended September 30, 2008. As of September 30, 2009, there was $678,000 of total unrecognized compensation cost related to nonvested stock-based compensation compared to $1.1 million at December 31, 2008. The compensation expense cost at September 30, 2009 is expected to be recognized ratably over the weighted average remaining service period of 2.6 years. There is no intrinsic value for stock options at September 30, 2009.

	Stock Options
Stock-Based Compensation	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Term
Outstanding at January 1, 2009		274,500	$	9.62		7.80
Granted		15,000		3.10
Exercised or converted		-		-
Forfeited		36,000		10.11
Expired		-		-
Outstanding at September 30, 2009		253,500	$	9.16		7.25
Exercisable at September 30, 2009		141,200	$	9.90		6.88

	Stock Options				Restricted Stock Awards
	Number of Shares		Fair-Value Price		Number of Shares		Fair-Value Price
Nonvested at January 1, 2009		173,700	$	3.08		73,600	$	9.25
Granted		15,000		1.66		5,000		3.10
Vested		40,400		3.09		17,900		10.04
Forfeited		36,000		3.16		12,000		10.11
Nonvested at September 30, 2009		112,300	$	2.86		48,700	$	8.12

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, 2008.

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.

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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. In March 2009, Exchange Underwriters, Inc. expanded its operation through the acquisition of the Allsurance Insurance Agency, which is a full service independent insurance agency that offers life, health and property and casualty insurance for individuals and small businesses. 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, 2009 were $353.6 million, an increase of $3.9 million, or 1.1%, from total assets of $349.8 million at December 31, 2008.

Securities available-for-sale decreased $3.5 million, or 4.1%, to $81.9 million at September 30, 2009 compared to $85.4 million at December 31, 2008. The decrease is primarily the result of $11.0 million of paydowns, $9.3 million of calls on Government-Sponsored Enterprise securities, and $4.1 million of sales of mortgage-backed securities, which was partially offset by the purchase of $18.0 million of Government-Sponsored Enterprises, mortgage-backed securities, municipal bonds and REMICs. In addition, the securities portfolio reflects an unrealized loss of $561,000 at September 30, 2009, primarily from corporate debt securities and private-label mortgage backed securities, compared to $1.8 million at December 31, 2008. Upon adoption of ASC 320-10 in the second quarter of 2009, the Company determined that $3.1 million of the previously recognized $4.8 million OTTI charges on private label mortgage-backed securities was credit related and $1.7 million was non-credit related. As a result, the book value of the portfolio increased $1.7 million for the noncredit loss portion that was reclassified as a fair market value adjustment through accumulated OCL.

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Loans, net, increased $10.8 million, or 4.7%, to $241.0 million at September 30, 2009 compared to $230.2 million at December 31, 2008. The increase was primarily the result of growth in commercial real estate, home equity, one-to-four family, and commercial business loans.

Liabilities.  Total liabilities at September 30, 2009 were $311.7 million, compared to $310.3 million at December 31, 2008, an increase of $1.3 million, or 0.4%.

Total deposits increased $15.7 million, or 9.1%, to $188.5 million at September 30, 2009 compared to $172.8 million at December 31, 2008. The increase in deposits was primarily in money market, certificates of deposit, and noninterest-bearing and interest-bearing demand deposits. Money market account and certificate of deposit growth was due to the marketing of promotional rates.

Borrowings decreased $13.6 million, or 10.3%, to $118.8 million at September 30, 2009 compared to $132.4 million at December 31, 2008. Funds generated through deposit growth and security related transactions were used to reduce borrowings.

Stockholders’ Equity.  Stockholders’ equity was $42.0 million at September 30, 2009, an increase of $2.5 million from December 31, 2008. As a result of adopting ASC 320-10, a $1.1 million increase to retained earnings (net of $584,000 of taxes) and a corresponding increase to accumulated OCL were recorded as the cumulative effect adjustment for the noncredit-related portion of OTTI losses previously recognized in earnings. In addition to the effect of applying ASC 320-10, there was a $1.9 million decrease in the unrealized loss position of the securities portfolio, net of tax. In addition, the Company had $472,000 in net income for the nine months ended September 30, 2009.

Results of Operations for the Three Months Ended September 30, 2009 and 2008

Overview.  The Company had net income of $105,000 for the three months ended September 30, 2009, compared to $66,000 for the same period in 2008.

	Three Months Ended
	September 30,
(Dollars in thousands)	2009			2008
Net income of FedFirst Financial Corporation	$	105		$	66
Return on average assets		0.12	%		0.08	%
Return on average equity		1.02			0.65
Average equity to average assets		11.75			11.81

Net Interest Income. Net interest income for the three months ended September 30, 2009 increased $233,000 to $2.4 million compared to $2.2 million for the three months ended September 30, 2008. Interest rate spread and net interest margin were 2.64% and 2.97%, respectively, for the three months ended September 30, 2009 compared to 2.23% and 2.66%, respectively, for the three months ended September 30, 2008. The improvement in interest rate spread and net interest margin is primarily attributable to lower costs on deposits coupled with a reduction in borrowings.

Interest income decreased $93,000, or 2.0%, to $4.5 million for the three months ended September 30, 2009 compared to the three months ended September 30, 2008 due to an decrease of $2.8 million in the average balance of interest-earning assets. Interest income on securities decreased $303,000 due to a decrease of $19.2 million in the average balance, primarily from calls, paydowns, and sales of Government-sponsored agencies and mortgage-backed securities. Interest income on other interest-earning assets decreased $66,000 due to the FHLB suspension of dividend payments on its capital stock in the fourth quarter of 2008. Interest income on loans increased $276,000 due to an increase of $20.5 million in the average balance, primarily driven by increases in commercial real estate, one-to-four family residential real estate, home equity, and commercial business loans.

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Interest expense decreased $326,000, or 13.5%, to $2.1 million for the three months ended September 30, 2009 compared to the three months ended September 30, 2008 due to a decrease of 48 basis points in cost, partially offset by an increase of $2.6 million in the average balance of interest-bearing liabilities. Interest expense on deposits decreased $162,000 due to a decrease of 62 basis points in cost, primarily related to the repricing of money market accounts and maturing certificates of deposits at lower rates, partially offset by an increase of $14.8 million in the average balance, primarily in money market accounts. Interest expense on borrowings decreased $164,000 due to a decrease of $12.1 million in the average balance related to deposit growth and security related transactions used to reduce borrowings.

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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.

	Three Months Ended September 30,
	2009						2008
(Dollars in thousands)	Average Balance		Interest and Dividends		Yield/ Cost		Average Balance		Interest and Dividends		Yield/ Cost
Assets:
Interest-earning assets:
Loans, net (1)(2)	$	238,885	$	3,494		5.85%	$	218,341	$	3,218		5.90%
Securities (3)		79,209		1,012		5.11		98,410		1,315		5.34
Other interest-earning assets		6,694		3		0.18		10,864		69		2.54
Total interest-earning assets		324,788	$	4,509		5.55		327,615	$	4,602		5.62
Noninterest-earning assets		24,123						16,201
Total assets	$	348,911					$	343,816
Liabilities and
Stockholders' equity:
Interest-bearing liablities:
Interest-bearing
demand deposits	$	14,187	$	11		0.31%	$	11,871	$	14		0.47%
Savings accounts		22,799		29		0.51		23,787		45		0.76
Money market accounts		50,661		223		1.76		37,429		296		3.16
Certificates of deposit		85,431		724		3.39		85,208		794		3.73
Total interest-bearing deposits		173,078		987		2.28		158,295		1,149		2.90
Borrowings		115,112		1,109		3.85		127,254		1,273		4.00
Total interest-bearing liabilities		288,190		2,096		2.91		285,549		2,422		3.39
Noninterest-bearing liabilities		19,729						17,672
Total liabilities		307,919						303,221
Stockholders' equity		40,992						40,595
Total liabilities and
stockholders' equity	$	348,911					$	343,816
Net interest income			$	2,413					$	2,180
Interest rate spread (4)						2.64%						2.23%
Net interest margin (5)						2.97						2.66
Average interest-earning
assets to average
interest-bearing liablities						112.70%						114.73%

(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, 2009
	Compared To
	Three Months Ended September 30, 2008
	Increase (decrease) due to
(Dollars in thousands)	Volume			Rate			Total
Interest and dividend income:
Loans, net	$	303		$	(27	)	$	276
Securities		(248	)		(55	)		(303	)
Other interest-earning assets		(20	)		(46	)		(66	)
Total interest-earning assets		35			(128	)		(93	)
Interest expense:
Deposits		100			(262	)		(162	)
Borrowings		(117	)		(47	)		(164	)
Total interest-bearing liablities		(17	)		(309	)		(326	)
Change in net interest income	$	52		$	181		$	233

Provision for Loan Losses.  The provision for loan losses was $300,000 for the three months ended September 30, 2009 compared to $260,000 for the three months ended September 30, 2008. The increase in the provision is primarily related to growth and composition of the loan portfolio, predominantly in commercial real estate and business, one-to-four family residential, and home equity loans. Although charge-offs declined to $107,000 for the three months ended September 30, 2009 compared to $130,000 for the three months ended September 30, 2008, current conditions in the housing and credit markets and an increase in nonaccrual loans also contributed to the increase in the provision. Total nonaccrual loans increased to $1.5 million at September 30, 2009 compared to $858,000 at September 30, 2008. The increase in nonaccrual loans is primarily related to two multi-family properties in our purchased secondary market portfolio.

Noninterest Income.  Noninterest income increased $124,000, or 21.3%, to $706,000 for the three months ended September 30, 2009 compared to $582,000 for the three months ended September 30, 2008. The increase is primarily attributable to an increase in insurance commissions due in part to the acquisition of Allsurance Insurance Agency in March 2009.

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

	Three Months Ended
	September 30,
(Dollars in thousands)	2009		2008
Compensation and employee benefits	$	1,471	$	1,373
Occupancy		359		328
FDIC insurance premiums		111		9
Data processing		114		104
Professional services		177		146
Advertising		64		22
Stationary, printing and supplies		37		27
Telephone		16		13
Postage		34		31
Correspondent bank fees		42		38
Real estate owned expense		17		114
All other		215		175
Total noninterest expense	$	2,657	$	2,380

Noninterest expense increased $277,000, or 11.6%, for the three months ended September 30, 2009 compared to the three months ended September 30, 2008, primarily due to an increase in FDIC insurance premiums as a result of a change in the assessment calculation. In addition, compensation and employee benefits expense increased $98,000 primarily related to the Allsurance Insurance Agency acquisition in March 2009 and the hiring of additional lending personnel in the fourth quarter of the prior year. Real estate owned expense decreased $97,000. In the prior period, the Company incurred $114,000 in real estate owned expenses primarily related to properties transferred to REO from the purchased secondary market portfolio.

Income Tax Expense.  Income tax expense for the three months ended September 30, 2009 was $57,000 compared to $51,000 for the same period in 2008.

Results of Operations for the Nine Months Ended September 30, 2009 and 2008

Overview.  The Company had net income of $472,000 for the nine months ended September 30, 2009 compared to $399,000 for the nine months ended September 30, 2008.

	Nine Months Ended
	September 30,
(Dollars in thousands)	2009			2008
Net income of FedFirst Financial Corporation	$	472		$	399
Return on average assets		0.18	%		0.16	%
Return on average equity		1.55			1.26
Average equity to average assets		11.62			12.70

Net Interest Income. Net interest income for the nine months ended September 30, 2009 increased $840,000 to $6.9 million compared to $6.1 million for the nine months ended September 30, 2008. Interest rate spread and net interest margin were 2.51% and 2.84%, respectively, for the nine months ended September 30, 2009 compared to 2.11% and 2.57%, respectively, for the nine months ended September 30, 2008. The improvement in interest rate spread and net interest margin is primarily attributed to growth in the loan portfolio coupled with lower costs on deposits.

29

Interest income increased $300,000, or 2.3%, to $13.6 million for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008 due to an increase in the average balance of interest-earning assets of $10.2 million. Interest income on loans increased $1.3 million due to increases of $31.0 million in the average balance, primarily driven by increases in commercial real estate, one-to-four family residential real estate, home equity, and commercial business loans. Interest income on securities decreased $751,000 due to a decrease of $16.4 million in the average balance, primarily due to the call and sale of Government-Sponsored Enterprises and mortgage-backed securities. Interest income on other interest-earning assets decreased $238,000 primarily due to the FHLB suspension of dividend payments on its capital stock in the fourth quarter of 2008.

Interest expense decreased $540,000, or 7.5%, to $6.7 million for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008 due to a decrease of 45 basis points in cost, partially offset by an increase of $16.2 million in the average balance of interest-bearing liabilities. Interest expense on deposits decreased $547,000 due to a decrease of 67 basis points in cost partially offset by an increase of $12.8 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.

30

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.

	Nine Months Ended September 30,
	2009						2008
(Dollars in thousands)	Average Balance		Interest and Dividends		Yield/ Cost		Average Balance		Interest and Dividends		Yield/ Cost
Assets:
Interest-earning assets:
Loans, net (1)(2)	$	234,061	$	10,226		5.83%	$	203,051	$	8,937		5.87%
Securities (3)		83,230		3,323		5.32		99,671		4,074		5.45
Other interest-earning assets		6,823		14		0.27		11,227		252		2.99
Total interest-earning assets		324,114	$	13,563		5.58		313,949	$	13,263		5.63
Noninterest-earning assets		24,928						17,873
Total assets	$	349,042					$	331,822
Liabilities and
Stockholders' equity:
Interest-bearing liablities:
Interest-bearing
demand deposits	$	13,064	$	35		0.36%	$	11,900	$	42		0.47%
Savings accounts		22,825		99		0.58		23,495		140		0.79
Money market accounts		47,998		778		2.16		26,853		640		3.18
Certificates of deposit		85,101		2,229		3.49		93,970		2,866		4.07
Total interest-bearing deposits		168,988		3,141		2.48		156,218		3,688		3.15
Borrowings		120,223		3,523		3.91		116,812		3,516		4.01
Total interest-bearing liabilities		289,211		6,664		3.07		273,030		7,204		3.52
Noninterest-bearing liabilities		19,262						16,645
Total liabilities		308,473						289,675
Stockholders' equity:		40,569						42,147
Total liabilities and
stockholders' equity	$	349,042					$	331,822
Net interest income			$	6,899					$	6,059
Interest rate spread (4)						2.51%						2.11%
Net interest margin (5)						2.84						2.57
Average interest-earning
assets to average
interest-bearing liablities						112.07%						114.99%

(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, 2009
	Compared To
	Nine Months Ended September 30, 2008
	Increase (decrease) due to
(Dollars in thousands)	Volume			Rate			Total
Interest and dividend income:
Loans, net	$	1,350		$	(61	)	$	1,289
Securities		(656	)		(95	)		(751	)
Other interest-earning assets		(72	)		(166	)		(238	)
Total interest-earning assets		622			(322	)		300
Interest expense:
Deposits		284			(831	)		(547	)
Borrowings		96			(89	)		7
Total interest-bearing liablities		380			(920	)		(540	)
Change in net interest income	$	242		$	598		$	840

Provision for Loan Losses.  The provision for loan losses was $690,000 for the nine months ended September 30, 2009 compared to $539,000 for the nine months ended September 30, 2008. The increase in the provision is primarily related to growth and composition of the loan portfolio, predominantly in commercial real estate and business, one-to-four family residential, and home equity loans. In addition, although charge-offs declined to $157,000 for the nine months ended September 30, 2009 compared to $350,000 for the nine months ended September 30, 2008, the provision increased to account for potential losses of loans currently in nonaccrual and current conditions in the housing and credit markets.  Total nonaccrual loans increased to $1.5 million at September 30, 2009 compared to $858,000 at September 30, 2008. The increase in nonaccrual loans over the prior year is primarily related to two multi-family properties in our purchased secondary market portfolio.

Noninterest Income.  Noninterest income increased $290,000 to $2.5 million for the nine months ended September 30, 2009 compared to $2.2 million for the nine months ended September 30, 2008. The increase was primarily attributable to an increase in insurance commissions due in part to the acquisition of Allsurance Insurance Agency in March 2009. In addition, fees and service charges increased $61,000 primarily related to an increase in deposit accounts. Gain on sales of available-for-sale securities decreased $83,000 to $73,000 in the current period compared to $156,000 in the prior 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)	2009		2008
Compensation and employee benefits	$	4,393	$	4,147
Occupancy		1,057		987
FDIC insurance premiums		459		20
Data processing		331		315
Professional services		489		415
Advertising		138		92
Stationary, printing and supplies		103		84
Telephone		47		45
Postage		105		102
Correspondent bank fees		127		117
Real estate owned expense		19		114
All other		598		532
Total noninterest expense	$	7,866	$	6,970

Noninterest expense increased $896,000, or 12.9%, for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008 primarily due to an increase in FDIC insurance premiums. In the current period, the FDIC imposed an industry-wide special five basis point assessment to cover losses in the Deposit Insurance Fund. The Company paid $155,000 for its portion of the special assessment. Increased premiums were also the result of a change in the assessment calculation and the Company’s depletion of credits that were available to offset premiums. In addition, compensation and employee benefits expense increased $246,000 primarily related to the Allsurance Insurance Agency acquisition in March 2009 and the hiring of additional lending personnel in the fourth quarter of the prior year. In the prior period, the Company incurred $114,000 in real estate owned expenses primarily related to properties transferred to REO from the purchased secondary market portfolio.

Income Tax Expense.  Income tax expense for the nine months ended September 30, 2009 was $320,000 compared to $306,000 for the same period in 2008.

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, 2009, cash and cash equivalents totaled $6.3 million. At September 30, 2009, securities classified as available-for-sale totaled $81.9 million, which provides an additional source of liquidity. In addition, at September 30, 2009, the maximum remaining borrowing capacity at the FHLB of Pittsburgh was approximately $88.7 million.

Certificates of deposit due within one year of September 30, 2009 totaled $48.6 million, or 56.2% 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.

	September 30,
(Dollars in thousands)	2009
Loans in process	$	3,470
Unused revolving lines of credit		3,062
Unused commercial business lines of credit		4,665
One-to-four family residential commitments		693
Consumer commitments		720
Total commitments outstanding	$	12,610

In May 2009, the FDIC imposed a special assessment on all insured institutions due to recent bank and savings association failures. The emergency assessment amounted to 5 basis points on each institution’s assets minus Tier 1 capital as of June 30, 2009, subject to a maximum equal to 10 basis points times the institution’s assessment base. Our special assessment, which was reflected in earnings for the quarter ended June 30, 2009, was $155,000. In addition, the FDIC will require, unless specifically exempted, that all institutions prepay on December 30, 2009 their assessments for the fourth quarter of 2009 and all of 2010, 2011 and 2012. The prepayment will be based on our assessment rate and assessment base for the third quarter of 2009, assuming a 5 percent annual growth in deposits each year. While the FDIC plan would maintain current assessment rates through 2010, effective January 1, 2011, the rates would increase by three basis points. We will book the total prepayment as a prepaid asset and draw it down as each quarterly payment comes due. In that respect, the prepayment option has the virtue of drawing from available cash and liquidity while not immediately reducing capital.

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, 2009, we exceeded all of our regulatory capital requirements and are considered “well capitalized” under regulatory guidelines. After careful analysis in the first quarter of 2009, we determined that existing capital was sufficient to meet anticipated needs and that it would not be in the best interests of shareholders to participate in the Capital Purchase Program conducted through the United States Treasury Department as part of the Troubled Asset Relief Program.

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, 2009, 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.

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Item 4T.  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, 2009, that has materially affected, or is reasonably likely to materially affect, FedFirst Financial’s internal control over financial reporting.

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.

Proposed regulatory reform may have a material impact on our operations.

The Obama Administration has published a comprehensive regulatory reform plan that is intended to modernize and protect the integrity of the United States financial system and has offered proposed legislation to accomplish these reforms. The President’s plan contains several elements that would have a direct effect on FedFirst Financial and First Federal Savings Bank. Under the initial proposed legislation, the federal thrift charter and the Office of Thrift Supervision would have been eliminated and all companies that control an insured depository institution would be required to register as a bank holding company. The House Financial Services Committee, in cooperation with the Treasury Department, has prepared alternative legislation that would preserve the thrift charter as well as federal mutual holding companies. Under this legislation, the Office of Thrift Supervision would be merged into the Office of the Comptroller of the Currency and a division within that agency would regulate federal thrifts. All holding companies of thrifts would be bank holding companies regulated by the Federal Reserve. Registration as a bank holding company would represent a significant change, as there currently exist significant differences between savings and loan holding company and bank holding company supervision and regulation. For example, the Federal Reserve imposes leverage and risk-based capital requirements on bank holding companies whereas the Office of Thrift Supervision does not impose any capital requirements on savings and loan holding companies. The Administration has also proposed the creation of a new federal agency, the Consumer Financial Protection Agency, that would be dedicated to protecting consumers in the financial products and services market. The creation of this agency could result in new regulatory requirements and raise the cost of regulatory compliance. In addition, legislation stemming from the reform plan could require changes in regulatory capital requirements, loan loss provisioning practices, and compensation practices. If implemented, the foregoing regulatory reforms may have a material impact on our operations. However, because the final legislation may differ significantly from the reform plan proposed by the President or from what is currently being discussed by Congress, we cannot determine the specific impact of regulatory reform at this time.

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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, 2009.

Period	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of the Publicly Announced Program (1)		Maximum Number of Shares that May Yet Be Purchased Under the Program (1)
July 2009		110	$	3.15		-		-
August 2009		3,193		3.10		-		-
Total		3,303		3.10		-

(1) In July and August 2009, the Company purchased 3,303 shares that were not made pursuant to a publicly announced program. It was 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.

None

Item 5.  Other Information.

None.

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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)

3.3 Amendment, effective September 22, 2009, to the Amended and Restated Bylaws of FedFirst Financial Corporation (4)

4.0 Specimen Stock Certificate of FedFirst Financial Corporation (1)

10.1 Amendment to the Employment Agreement by and between Exchange Underwriters, Inc. and Richard B. Boyer, effective September 19, 2009 (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 Patrick G. O’Brien 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 10-K filed on March 16, 2009.

(3) Management contract or compensation plan or arrangement.

(4) Incorporated herein by reference to FedFirst Financial Corporation’s Form 8-K filed on September 28, 2009.

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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:	November 13, 2009	/s/ Patrick G. O’Brien
		Patrick G. O’Brien
		President and Chief Executive Officer
Date:	November 13, 2009	/s/ Robert C. Barry Jr.
		Robert C. Barry Jr.
		Chief Financial Officer and Executive Vice President
		(Principal Financial Officer and Chief Accounting Officer)

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