FedFirst Financial 10-Q 2012 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2012

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: 0-54124

FEDFIRST FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

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

565 Donner Avenue, 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 T    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 August 6, 2012, the issuer had 2,884,542 shares of common stock outstanding.

FORM 10-Q

INDEX

	Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements	1
Consolidated Statements Of Financial Condition at June 30, 2012 (Unaudited) and December 31, 2011	1
Consolidated Statements Of Operations for the Three and Six Months Ended June 30, 2012 and 2011 (Unaudited)	2
Consolidated Statements Of Comprehensive Income for the Three and Six Months Ended June 30, 2012 and 2011 (Unaudited)	3
Consolidated Statements Of Changes In Stockholders’ Equity for the Six Months Ended June 30, 2012 and 2011 (Unaudited)	3
Consolidated Statements Of Cash Flows for the Six Months Ended June 30, 2012 and 2011 (Unaudited)	4
Notes to the Unaudited Consolidated Financial Statements	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3. Quantitative and Qualitative Disclosures About Market Risk	41
Item 4. Controls and Procedures	41
PART II – OTHER INFORMATION
Item 1. Legal Proceedings	41
Item 1A. Risk Factors	41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3. Defaults Upon Senior Securities	42
Item 4. Mine Safety Disclosures	42
Item 5. Other Information	42
Item 6. Exhibits	42
SIGNATURES

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION AT

JUNE 30, 2012 (UNAUDITED) AND DECEMBER 31, 2011

	June 30,		December 31,
(Dollars in thousands, except share data)	2012		2011
Assets:
Cash and cash equivalents:
Cash and due from banks	$    1,888		$    1,491
Interest-earning deposits	20,881		13,080
Total cash and cash equivalents	22,769		14,571
Securities available-for-sale	51,280		52,448
Loans, net	242,958		245,277
Federal Home Loan Bank (“FHLB”) stock, at cost	4,819		5,340
Accrued interest receivable - loans	890		1,008
Accrued interest receivable - securities	241		236
Premises and equipment, net	2,025		2,164
Bank-owned life insurance	8,397		8,267
Goodwill	1,080		1,080
Real estate owned	234		544
Deferred tax assets	3,104		3,096
Other assets	957		1,243
Total assets	$ 338,754		$ 335,274
Liabilities and Stockholders’ Equity:
Deposits:
Noninterest-bearing	$   24,161		$   20,536
Interest-bearing	205,058		201,004
Total deposits	229,219		221,540
Borrowings	45,881		49,289
Advance payments by borrowers for taxes and insurance	608		514
Accrued interest payable - deposits	171		228
Accrued interest payable - borrowings	190		202
Other liabilities	4,121		4,700
Total liabilities	280,190		276,473
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; 2,893,542 and 2,957,302 shares issued and outstanding	29		30
Additional paid-in-capital	40,551		41,630
Retained earnings - substantially restricted	19,501		18,650
Accumulated other comprehensive loss, net of deferred tax benefit of $(173) and $(107)	(270	)	(167	)
Unearned Employee Stock Ownership Plan (“ESOP”)	(1,296	)	(1,382	)
Total FedFirst Financial Corporation stockholders’ equity	58,515		58,761
Noncontrolling interest in subsidiary	49		40
Total stockholders’ equity	58,564		58,801
Total liabilities and stockholders’ equity	$ 338,754		$ 335,274

See Notes to the Unaudited Consolidated Financial Statements.

1

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE

AND SIX MONTHS ENDED JUNE 30, 2012 AND 2011 (UNAUDITED)

	Three Months			Six Months
	Ended June 30,			Ended June 30,
(Dollars in thousands, except per share data)	2012	2011		2012	2011
Interest income:
Loans	$      3,050	$      3,271		$      6,200	$      6,490
Securities - taxable	393	640		821	1,350
Securities - tax exempt	38	-		73	-
Other interest-earning assets	9	2		15	5
Total interest income	3,490	3,913		7,109	7,845
Interest expense:
Deposits	533	723		1,135	1,434
Borrowings	431	545		885	1,166
Total interest expense	964	1,268		2,020	2,600
Net interest income	2,526	2,645		5,089	5,245
Provision for loan losses	50	200		210	450
Net interest income after provision for loan losses	2,476	2,445		4,879	4,795
Noninterest income:
Fees and service charges	162	134		317	258
Insurance commissions	559	554		1,185	1,183
Income from bank-owned life insurance	65	67		130	135
Net loss on sales of available-for-sale securities	-	-		-	(1	)
Net gain (loss) on sales of real estate owned	20	(11	)	2	(14	)
Other	70	12		81	29
Total noninterest income	876	756		1,715	1,590
Noninterest expense:
Compensation and employee benefits	1,417	1,603		2,794	3,204
Occupancy	300	381		617	735
FDIC insurance premiums	54	71		112	157
Data processing	133	128		270	252
Professional services	147	224		399	403
Other	368	400		731	793
Total noninterest expense	2,419	2,807		4,923	5,544
Income before income tax expense and noncontrolling interest in net income of consolidated subsidiary	933	394		1,671	841
Income tax expense	335	138		600	299
Net income before noncontrolling interest in net income of consolidated subsidiary	598	256		1,071	542
Noncontrolling interest in net income of consolidated subsidiary	4	10		21	28
Net income of FedFirst Financial Corporation	$        594	$        246		$   1,050	$        514
Earnings per share:
Basic and diluted	$       0.21	$       0.08		$       0.37	$       0.18
Weighted-average shares outstanding:
Basic	2,884,156	2,909,733		2,846,518	2,906,665
Diluted	2,887,210	2,917,007		2,849,534	2,912,103

See Notes to the Unaudited Consolidated Financial Statements.

2

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE

THREE AND SIX MONTHS ENDED JUNE 30, 2012 AND 2011 (UNAUDITED)

	Three Months		Six Months
	Ended June 30,		Ended June 30,
(Dollars in thousands)	2012	2011	2012		2011
Net income before noncontrolling interest in net income of consolidated subsidiary	$        598	$        256	$1,071		$        542
Other comprehensive income (loss):
Unrealized gain (loss) on securities available-for-sale, net of income tax expense (benefit)	78	277	(103	)	863
Reclassification adjustment on sales of securities available-for-sale, net of income tax benefit	-	-	-		(35	)
Other comprehensive income (loss), net of income tax expense (benefit)	78	277	(103	)	828
Comprehensive income	676	533	968		1,370
Less: Comprehensive income attributable to the noncontrolling interest in subsidiary	4	10	21		28
Comprehensive income attributable to FedFirst Financial Corporation	$        672	$        523	$        947		$1,342

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011 (UNAUDITED)

									Accumulated
			Additional						Other						Noncontrolling			Total
	Common		Paid-in-			Retained			Comprehensive			Unearned			Interest in			Stockholders’
(Dollars in thousands, except per share data)	Stock		Capital			Earnings			Gain (Loss)			ESOP			Subsidiary			Equity
Balance at January 1, 2011	$	30	$	42,016		$	18,140		$	(128	)	$	(1,555	)	$	84		$	58,587
Comprehensive income:
Net income	-		-			514			-			-			28			542
Other comprehensive income, net of tax of $534	-		-			-			828			-			-			828
ESOP shares committed to be released	-		(28		)	-			-			86			-			58
Stock-based compensation expense	-		147			-			-			-			-			147
Stock awards granted	-		(79		)	-			-			-			-			(79		)
Distribution to noncontrolling shareholder	-		-			-			-			-			(56		)	(56		)
Dividends paid ($0.06 per share)	-		-			(175		)	-			-			-			(175		)
Balance at June 30, 2011	$	30	$	42,056		$	18,479		$	700		$	(1,469	)	$	56		$	59,852

										Accumulated
				Additional						Other						Noncontrolling			Total
	Common			Paid-in-			Retained			Comprehensive			Unearned			Interest in			Stockholders’
(Dollars in thousands, except per share data)	Stock			Capital			Earnings			Loss			ESOP			Subsidiary			Equity
Balance at January 1, 2012	$	30		$	41,630		$	18,650		$	(167	)	$	(1,382	)	$	40		$	58,801
Comprehensive income (loss):
Net income	-			-			1,050			-			-			21			1,071
Other comprehensive loss, net of tax of $(66)	-			-			-			(103		)	-			-			(103		)
Purchase and retirement of common stock (80,000 shares)	(1		)	(1,119		)	-			-			-			-			(1,120		)
ESOP shares committed to be released	-			(29		)	-			-			86			-			57
Stock-based compensation expense	-			69			-			-			-			-			69
Distribution to noncontrolling shareholder	-			-			-			-			-			(12		)	(12		)
Dividends paid ($0.07 per share)	-			-			(199		)	-			-			-			(199		)
Balance at June 30, 2012	$	29		$	40,551		$	19,501		$	(270	)	$	(1,296	)	$	49		$	58,564

See Notes to the Unaudited Consolidated Financial Statements.

3

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX

MONTHS ENDED JUNE 30, 2012 AND 2011 (UNAUDITED)

	Six Months
	Ended June 30,
(Dollars in thousands)	2012		2011
Cash flows from operating activities:
Net income of FedFirst Financial Corporation	$      1,050		$         514
Adjustments to reconcile net income to net cash provided by operating activities:
Noncontrolling interest in net income of consolidated subsidiary	21		28
Provision for loan losses	210		450
Depreciation	204		277
Amortization of intangibles	54		55
Net loss on sales of available-for-sale securities	-		1
Net (gain) loss on sales of real estate owned	(2	)	14
Net amortization of security premiums and loan costs	301		184
Noncash expense for ESOP	57		58
Noncash expense for stock-based compensation	69		147
Increase in bank-owned life insurance	(130	)	(135	)
Decrease in other assets	410		977
Decrease in other liabilities	(648	)	(85	)
Net cash provided by operating activities	1,596		2,485
Cash flows from investing activities:
Net loan repayments (originations)	2,007		(11,275	)
Proceeds from maturities of and principal repayments of securities available-for-sale	10,079		10,101
Proceeds from sales of securities available-for-sale	-		2,006
Purchases of securities available-for-sale	(9,299	)	-
Purchases of premises and equipment	(65	)	(305	)
Decrease in FHLB stock, at cost	521		639
Proceeds from sales of real estate owned	325		281
Net cash provided by investing activities	3,568		1,447
Cash flows from financing activities:
Net decrease in short-term borrowings	-		(4,200	)
Repayments of long-term borrowings	(3,408	)	(15,680	)
Net increase in deposits	7,679		21,292
Decrease in advance payments by borrowers for taxes and insurance	94		246
Purchase and retirement of common stock	(1,120	)	-
Dividends paid	(199	)	(175	)
Distribution to noncontrolling shareholder	(12	)	(56	)
Net cash provided by financing activities	3,034		1,427
Net increase in cash and cash equivalents	8,198		5,359
Cash and cash equivalents, beginning of period	14,571		9,320
Cash and cash equivalents, end of period	$    22,769		$    14,679
Supplemental cash flow information:
Cash paid for:
Interest on deposits and borrowings (including interest credited to deposit accounts of $1,192 and $1,490 respectively)	$      2,089		$      2,722
Income tax expense	720		52
Real estate acquired in settlement of loans	20		321

See Notes to the Unaudited Consolidated Financial Statements.

4

Notes to the Unaudited Consolidated Financial Statements

Note 1.  Basis of Presentation/Nature of Operations

The accompanying unaudited Consolidated Financial Statements include the accounts of FedFirst Financial Corporation (“FedFirst Financial” or the “Company”), a stock holding company established in 2010, whose wholly owned subsidiary is First Federal Savings Bank (“First Federal” or the “Bank”), a federally chartered stock savings bank, which owns FedFirst Exchange Corporation (“FFEC”). FFEC has an 80% controlling interest in Exchange Underwriters, Inc. (“Exchange Underwriters”). Exchange Underwriters is a full-service, independent insurance agency that offers property and casualty, commercial liability, surety and other insurance products. All significant intercompany transactions have been eliminated.

First Federal operates 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 eight locations in southwestern Pennsylvania. On July 20, 2012, the Company announced that it had filed notice with the Office of the Comptroller of the Currency to close its Donora office with a proposed closing date of October 26, 2012. First Federal conducts insurance brokerage activities through Exchange Underwriters. 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 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, 2011. The results of operations for the six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the full year or any other interim period.

The Company evaluated subsequent events through the date the consolidated financial statements were filed with the Securities and Exchange Commission and incorporated into the consolidated financial statements the effect of all material known events determined by Accounting Standards Codification (“ASC”) Topic 855, Subsequent Events, to be recognizable events.

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.

5

Note 2.  Recent Accounting Pronouncements

ASU 2011-04 Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.  The ASU is the result of joint efforts by the FASB and International Accounting Standards Board (“IASB”) to develop a single, converged fair value framework on how (not when) to measure fair value and on what disclosures to provide about fair value measurements. While the ASU is largely consistent with existing fair value measurement principles in U.S. GAAP, it expands existing disclosure requirements for fair value measurements and makes other amendments to ASC 820, Fair Value Measurement. Many of these amendments were made to eliminate unnecessary wording differences between U.S. GAAP and IFRSs. However, some could change how the fair value measurement guidance in ASC 820 is applied. The ASU is effective for interim and annual periods beginning after December 15, 2011. The adoption of this ASU did not have a material impact on the Company’s financial condition and results of operation.

ASU 2011-05 Presentation of Comprehensive Income. In September 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income, which revises the manner in which entities present comprehensive income in their financial statements. The new guidance eliminates the option to present components of other comprehensive income as part of the Statements of Changes to Stockholders’ Equity and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format used today, and the second statement would include components of other comprehensive income (“OCI”). The ASU does not change the items that must be reported in OCI. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Guidance must be applied retrospectively for all periods presented in the financial statements. The adoption of this ASU did not have a material impact on the Company’s financial condition and results of operation.

ASU 2011-08 Testing for Goodwill for Impairment. In September 2011, the FASB issued ASU No. 2011-08, Testing Goodwill for Impairment, which amends the guidance on testing goodwill impairment. Under the revised guidance, entities testing goodwill for impairment have the option of performing a qualitative assessment before calculating the fair value of the reporting unit (i.e. step 1 of the goodwill impairment test). If entities determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. The ASU does not change how goodwill is calculated or assigned to reporting units, nor does it revise the requirement to test goodwill annually for impairment. In addition, the ASU does not amend the requirement to test goodwill for impairment between annual tests if events or circumstances warrant; however, it does revise the examples of events and circumstances that an entity should consider. This ASU is effective for annual and interim goodwill impairment tests performed for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this ASU will not have a material impact on the Company’s financial condition and results of operation.

ASU 2011-12 Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update 2011-05. In December, 2011, the FASB issued ASU 2011-12, Deferral of the Effective Date to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update 2011-05. In response to concerns regarding the operational ramifications of the presentation requirements for reclassification of items out of accumulated other comprehensive income for current and previous years, the FASB has deferred the implementation date of this provision in ASU 2011-05, Presentation of Comprehensive Income, to allow time for further consideration. The requirement in ASU 2011-05 for the presentation of a combined statement of comprehensive income or separate, but consecutive, statements of net income and other comprehensive income is still effective for fiscal years and interim periods beginning after December 15, 2011 for public companies. The adoption of this ASU did not have a material impact on the Company’s financial condition and results of operation.

6

Note 3.  Securities

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

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
June 30, 2012	Cost		Gains		Losses		Value
Municipal bonds	$	8,789	$	418	$	40	$	9,167
Mortgage-backed	15,538		879		2		16,415
REMICs	23,397		643		-		24,040
Corporate debt	3,995		-		2,341		1,654
Equities	4		-		-		4
Total securities available-for-sale	$	51,723	$	1,940	$	2,383	$	51,280
December 31, 2011
Government-Sponsored Enterprises	$	2,000	$	3	$	-	$	2,003
Municipal bonds	6,738		391		4		7,125
Mortgage-backed	16,572		972		-		17,544
REMICs	23,413		916		11		24,318
Corporate debt	3,995		-		2,541		1,454
Equities	4		-		-		4
Total securities available-for-sale	$	52,722	$	2,282	$	2,556	$	52,448

The amortized cost and fair value of securities at June 30, 2012 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	$	700	$	722
Due from one to five years	2,020		2,368
Due from five to ten years	6,275		6,483
Due after ten years	42,724		41,703
No scheduled maturity	4		4
Total	$	51,723	$	51,280

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
				Gross					Gross					Gross
	Number of	Fair		Unrealized		Number of	Fair		Unrealized		Number of	Fair		Unrealized
June 30, 2012	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Municipal bonds	2	$	2,682	$	40	-	$	-	$	-	2	$	2,682	$	40
Mortgage-backed	2	2,095		2		-	-		-		2	2,095		2
Corporate debt	-	-		-		3	1,654		2,341		3	1,654		2,341
Total securities temporarily impaired	4	$	4,777	$	42	3	$	1,654	$	2,341	7	$	6,431	$	2,383

7

	Less than 12 months					12 months or more					Total
				Gross					Gross					Gross
	Number of	Fair		Unrealized		Number of	Fair		Unrealized		Number of	Fair		Unrealized
December 31, 2011	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Municipal bonds	1	$	572	$	4	-	$	-	$	-	1	$	572	$	4
REMICs	1	1,531		11		-	-		-		1	1,531		11
Corporate debt	-	-		-		3	1,454		2,541		3	1,454		2,541
Total securities temporarily impaired	2	$	2,103	$	15	3	$	1,454	$	2,541	5	$	3,557	$	2,556

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.

Corporate Debt – At June 30, 2012, the Company had three securities that were in an unrealized loss position for 12 months or more 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 the Company’s pooled preferred trust obligations at June 30, 2012 (dollars in thousands):

Pool	Class	Tranche	Amortized Cost		Fair Value		Unrealized Loss			S&P / Fitch Rating	Current Number of Insurance Companies	Total Collateral		Current Deferrals and Defaults		Performing Collateral		Additional Immediate Deferrals / Defaults Before Causing an Interest Shortfall (a)		Additional Immediate Deferrals / Defaults Before Causing a Break in Yield (b)
I-PreTSL I	Mezzanine	B-3	$	1,500	$	482	$	(1,018	)	B+/CCC	16	$	188,500	$	32,500	$	156,000	$	94,338	$	43,500
I-PreTSL II	Mezzanine	B-3	2,495		1,172		(1,323		)	B+/B	25	340,500		17,500		323,000		323,000		126,000
			$	3,995	$	1,654	$	(2,341	)

(a)A temporary interest shortfall is caused by an amount of deferrals/defaults high enough such that there is insufficient cash flow available to pay current interest on the given tranche or by breaching the principal coverage test of the tranche immediately senior to the given tranche. Amounts presented represent additional deferrals/defaults beyond those currently existing that must occur before the security would experience an interest shortfall.

(b)A break in yield for a given tranche means that deferrals/defaults have reached such a level that the tranche would not receive all of its contractual cash flows (principal and interest) by maturity (so not just a temporary interest shortfall, but an actual loss in yield on the investment). In other words, the magnitude of the defaults/deferrals has depleted the entire credit enhancement (excess interest and over-collateralization) beneath the given tranche. Amounts presented represent additional deferrals/defaults beyond those currently existing that must occur before the security would experience a break in yield.

8

These securities are evaluated for other-than-temporary impairment (“OTTI”) 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). None of these securities are projecting a cash flow disruption, nor have any of these securities experienced a cash flow disruption. The Company also reviewed each of the issues’ collateral participants, including their financial condition, ratings provided by A. M. Best (for insurance companies), and adverse conditions specifically related to industry or geographic area. This information did not suggest additional deferrals or defaults in the future that would result in the securities not receiving all of their contractual cash flows. Based on the analysis performed and the fact that the Company does not expect to sell these securities, and because 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 June 30, 2012.

Other Securities – This category may include Government-Sponsored Enterprises (“GSE”), municipal bonds, mortgage-backed securities and REMICS.  At June 30, 2012, the Company had a total of four securities with an unrealized loss of $42,000 in these categories, including two municipal bonds with an unrealized loss of $40,000 and two mortgage-backed securities with an unrealized loss of $2,000. These securities were in an unrealized loss position for less than 12 months. An evaluation of the individual securities was performed, including a review of all credit ratings, which remain at investment grade. The mortgage-backed securities were issued and backed by a Government-Sponsored Enterprise (“FNMA”). The Company believes the unrealized loss of these securities is due to changes in market interest rates or changes in market conditions as there was no indication that the issuer was having financial difficulties. The Company does not intend to sell the securities and it is not more likely than not that the Company will 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 at June 30, 2012.

9

Note 4.  Loans

The following table sets forth the composition of our loan portfolio at the dates indicated (dollars in thousands).

	June 30, 2012					December 31, 2011
	Amount			Percent		Amount			Percent
Real estate-mortgage:
One-to four- family residential
Originated	$	111,630		44.8	%	$	117,622		46.0	%
Purchased	14,180			5.7		16,304			6.4
Total one-to four- family residential	125,810			50.5		133,926			52.4
Multi-family
Originated	11,828			4.7		13,122			5.1
Purchased	5,050			2.0		5,121			2.0
Total multi-family	16,878			6.7		18,243			7.1
Commercial	40,856			16.4		35,307			13.8
Total real estate-mortgage	183,544			73.6		187,476			73.3
Real estate-construction:
Residential	3,240			1.3		3,874			1.5
Commercial	6,233			2.5		8,308			3.3
Total real estate-construction	9,473			3.8		12,182			4.8
Consumer:
Home equity
Loan-to-value ratio of 80% or less	35,949			14.4		30,679			12.0
Loan-to-value ratio of greater than 80%	8,068			3.2		7,758			3.1
Total home equity	44,017			17.6		38,437			15.1
Other	1,457			0.6		1,892			0.7
Total consumer	45,474			18.2		40,329			15.8
Commercial business	10,935			4.4		15,445			6.1
Total loans	$	249,426		100.0	%	$	255,432		100.0	%
Net premiums on loans purchased	126					127
Net deferred loan costs	525					606
Loans in process	(4,131		)			(7,790		)
Allowance for loan losses	(2,988		)			(3,098		)
Loans, net	$	242,958				$	245,277

10

Nonperforming Assets.  The following table provides information with respect to our nonperforming assets at the dates indicated (dollars in thousands).

	June 30,			December 31,
	2012			2011
Nonaccrual loans:
Real estate - mortgage loans
One-to four- family residential
Originated	$	320		$	128
Purchased	2,103			1,416
Total one-to four- family residential	2,423			1,544
Multi-family
Originated	-			-
Purchased	-			-
Total multi-family	-			-
Commercial	453			568
Total real estate - mortgage	2,876			2,112
Real estate - construction loans
Residential	-			-
Commercial	-			-
Total real estate - construction	-			-
Consumer loans
Home equity
Loan-to-value ratio of 80% or less	100			-
Loan-to-value ratio of greater than 80%	-			33
Total home equity	100			33
Other	1			-
Total consumer	101			33
Commercial business	-			-
Total nonaccrual loans	2,977			2,145
Accruing loans past due 90 days or more	-
Total nonaccrual loan and accruing loans past due 90 days or more	2,977			2,145
Real estate owned	234			544
Total nonperforming assets	$	3,211		$	2,689
Troubled debt restructurings
In nonaccrual status	362			465
Performing under modified terms	1,517			1,565
Troubled debt restructurings	$	1,879		$	2,030
Total nonperforming loans to total loans	1.19		%	0.84		%
Total nonperforming assets to total assets	0.95			0.80

11

At June 30, 2012 nonaccrual loans consisted primarily of 12 residential mortgage loans that totaled $2.4 million, of which two were originated internally in the amount of $320,000 and ten were purchased in the amount of $2.1 million. 11 of the nonaccrual residential mortgage loans were in the process of foreclosure at June 30, 2012. The nonaccrual purchased residential loans include one relationship comprised of five loans totaling $1.2 million. Additionally, nonaccrual loans included two commercial real estate loans in the amount of $453,000, two home equity installment loans in the amount of $100,000 and one other consumer loan in the amount of $1,000.

At December 31, 2011 nonaccrual loans consisted primarily of nine residential mortgage loans that totaled $1.5 million, of which one was originated internally in the amount of $128,000 and eight were purchased in the amount of $1.4 million. Of these loans, the eight purchased residential properties were in the process of foreclosure at December 31, 2011. The nonaccrual purchased residential loans included one relationship comprised of six loans totaling $1.3 million. Additionally, nonaccrual loans included two commercial real estate relationships, which consisted of three loans in the amount of $568,000, and one home equity loan in the amount of $33,000.

Loans whose contractual terms have been restructured in a manner which grants a concession to a borrower experiencing financial difficulties are considered troubled debt restructurings (“TDRs”). TDRs typically are the result of our loss mitigation activities and could include rate reductions, principal forgiveness, forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral.

The Bank had three relationships classified as TDRs at June 30, 2012 and December 31, 2011 summarized as follows:

· One relationship with a total balance of $362,000 and $465,000 at June 30, 2012 and December 31, 2011, respectively. The borrower was experiencing financial difficulties and was given a six month interest-only payment concession in 2010. After conclusion of the interest-only period in 2011, the borrower was unable to consistently make regular loan payments and defaulted on the loans, which resulted in the Bank beginning the foreclosure process on the collateral securing the loans. To halt foreclosure, the borrower signed a forbearance agreement and, in 2012, paid off one of the loans and began making monthly payments. If a payment is missed the foreclosure process will restart. This relationship was evaluated for impairment and it was determined based on an appraisal of the underlying loan collateral that a specific allowance was not necessary because there was sufficient collateral to cover the outstanding loan balance. This loan is included in total nonaccrual loans in the previous table.

· One commercial real estate participation loan with a balance of $645,000 and $654,000 at June 30, 2012 and December 31, 2011, respectively. Because the borrower believed it would be unable to obtain financing to pay the loan in full upon original maturity in 2010, the loan was modified through a forbearance agreement in 2010 by extending the maturity date by three years to 2013. This loan has demonstrated performance under the modified terms and therefore was in a performing (accrual) status at June 30, 2012. This relationship was evaluated for impairment and it was determined based on receipt of an updated appraisal on the property in 2012 that a $170,000 specific allowance was no longer necessary due to an increase in the collateral value.

· One relationship with a total balance of $872,000 and $911,000 at June 30, 2012 and December 31, 2011, respectively. The relationship consisted of three commercial real estate loans and two consumer loans that have been deemed impaired based on the current financial standing of the borrower. In the fourth quarter of 2011, the three commercial business loans were consolidated into one commercial real estate loan and additional collateral was obtained. These loans have demonstrated performance under the modified terms and therefore were in a performing (accrual) status at June 30, 2012. After enhancing the collateral position and reviewing the updated property appraisals of the underlying loan collateral and the updated valuation of the other business assets securing the loan, it was determined that there was sufficient collateral to cover the outstanding loan balance and, therefore, a specific allowance was not necessary.

12

The following tables summarize information in regards to impaired loans by loan portfolio class at the dates indicated (dollars in thousands).

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
June 30, 2012	Investment		Balance		Allowance		Investment		Recognized
Impaired loans with no related allowance recorded
One-to four- family originated residential	$	285	$	285	$	-	$	285	$	-
One-to four- family purchased residential	1,171		1,171		-		1,372		-
Commercial real estate	1,732		1,809		-		1,805		37
Home equity (loan-to-value ratio of 80% or less)	138		138		-		139		4
Other consumer	10		10		-		10		-
Total impaired loans	$	3,336	$	3,413	$	-	$	3,611	$	41
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
December 31, 2011	Investment		Balance		Allowance		Investment		Recognized
Impaired loans with no related allowance recorded
One-to four- family purchased residential	$	1,287	$	1,287	$	-	$	1,290	$	11
Commercial real estate	1,447		1,510		-		1,484		60
Home equity (loan-to-value ratio of 80% or less)	140		140		-		143		9
Other consumer	11		11		-		12		1
Impaired loans with an allowance recorded
Commercial real estate	654		654		170		663		32
One-to four- family purchased residential	$	1,287	$	1,287	$	-	$	1,290	$	11
Commercial real estate	2,101		2,164		170		2,147		92
Home equity (loan-to-value ratio of 80% or less)	140		140		-		143		9
Other consumer	11		11		-		12		1
Total impaired loans	$	3,539	$	3,602	$	170	$	3,592	$	113

13

Federal regulations require us to review and classify our assets on a regular basis. In addition, the OCC has the authority to identify problem assets and, if appropriate, require them to be classified. There are four classifications for problem assets: special mention, substandard, doubtful and loss. The following table presents the classes of the loan portfolio and shows our credit risk profile by internally assigned risk rating at the dates indicated (dollars in thousands).

	Real estate - mortgage										Real estate- construction				Consumer
	One-to		One-to-												Home		Home
	four-		four												equity (loan-		equity (loan-
	family		family		Multi-		Multi-								to-value		to-value ratio				Com-
	residential		residential		family		family		Com-		Resi-		Com-		ratio of		of greater		Other		mercial		Loans
June 30, 2012	(originated)		(purchased)		(originated)		(purchased)		mercial		dential		mercial		80% or less)		than 80%)		Consumer		business		Total
Grade:
Pass	$	111,050	$	12,077	$	11,828	$	5,050	$	37,671	$	3,240	$	6,233	$	35,711	$	8,068	$	1,446	$	10,935	$	243,309
Special Mention	260		-		-		-		1,362		-		-		-		-		-		-		1,622
Substandard	320		2,103		-		-		1,823		-		-		238		-		11		-		4,495
Doubtful	-		-		-		-		-		-		-		-		-		-		-		-
Loss	-		-		-		-		-		-		-		-		-		-		-		-
Total	$	111,630	$	14,180	$	11,828	$	5,050	$	40,856	$	3,240	$	6,233	$	35,949	$	8,068	$	1,457	$	10,935	$	249,426
	Real estate - mortgage										Real estate- construction				Consumer
	One-to		One-to-												Home		Home
	four-		four												equity (loan-		equity (loan-
	family		family		Multi-		Multi-								to-value		to-value ratio				Com-
	residential		residential		family		family		Com-		Resi-		Com-		ratio of		of greater		Other		mercial		Loans
December 31, 2011	(originated)		(purchased)		(originated)		(purchased)		mercial		dential		mercial		80% or less)		than 80%)		Consumer		business		Total
Grade:
Pass	$	117,232	$	14,888	$	13,122	$	5,121	$	31,026	$	3,874	$	8,308	$	30,539	$	7,725	$	1,881	$	15,445	$	249,161
Special Mention	262		-		-		-		2,076		-		-		-		-		-		-		2,338
Substandard	128		1,416		-		-		2,205		-		-		140		33		11		-		3,933
Doubtful	-		-		-		-		-		-		-		-		-		-		-		-
Loss	-		-		-		-		-		-		-		-		-		-		-		-
Total	$	117,622	$	16,304	$	13,122	$	5,121	$	35,307	$	3,874	$	8,308	$	30,679	$	7,758	$	1,892	$	15,445	$	255,432

14

At June 30, 2012, special mention assets were $1.6 million and included three relationships that consisted of four commercial real estate loans and one mortgage loan totaling $1.4 million and $260,000, respectively. Substandard assets were $4.5 million and consisted of $3.0 million of non-accrual loans, one commercial real estate loan in the amount of $645,000 and one relationship that totaled $872,000 and consisted of three commercial real estate loans totaling $724,000 and two consumer loans totaling $148,000. Nonaccrual loans consisted of $2.4 million of residential mortgage loans, $453,000 of commercial real estate loans and $101,000 of consumer loans. The nonaccrual residential loans included one purchased relationship which was comprised of five loans totaling $1.2 million.

At December 31, 2011, special mention assets were $2.3 million and included three relationships that consisted of four commercial real estate loans and one mortgage loan totaling $2.1 million and $262,000, respectively. Substandard assets were $3.9 million and consisted of $2.1 million of non-accrual loans, two commercial real estate loans in the amount of $877,000 and one relationship that totaled $911,000 and consisted of three commercial real estate loans totaling $760,000 and two consumer loans totaling $151,000. Nonaccrual loans consisted of $1.5 million of residential mortgage loans, $568,000 of commercial real estate loans, and a $33,000 home equity loan. The nonaccrual residential loans included one purchased relationship comprised of six loans totaling $1.3 million.

Delinquencies. The following table provides information about delinquencies in our loan portfolio at the dates indicated (dollars in thousands).

	June 30, 2012						December 31, 2011
	30-59		60-89		90 Days		30-59		60-89		90 Days
	Days		Days		or Greater		Days		Days		or Greater
	Past		Past		Past		Past		Past		Past
	Due		Due		Due		Due		Due		Due
Real estate - mortgage
One-to four- family residential
Originated	$	-	$	255	$	320	$	681	$	584	$	-
Purchased	41		-		2,103		-		172		1,416
Total one-to four- family residential	41		255		2,423		681		756		1,416
Multi-family
Originated	-		-		-		-		-		-
Purchased	-		-		-		-		-		-
Total multi-family	-		-		-		-		-		-
Commercial	-		38		91		25		504		568
Total real estate - mortgage	41		293		2,514		706		1,260		1,984
Real estate - construction
Residential	-		-		-		-		-		-
Commercial	-		-		-		-		-		-
Total real estate - construction	-		-		-		-		-		-
Consumer
Home equity
Loan-to-value ratio of 80% or less	-		-		100		68		-		-
Loan-to-value ratio of greater than 80%	-		48		-		48		-		33
Total home equity	-		48		100		116		-		33
Other	5		15		1		1		4		-
Total consumer	5		63		101		117		4		33
Commercial business	-		-		-		28		-		-
Total delinquencies	$	46	$	356	$	2,615	$	851	$	1,264	$	2,017

15

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 charged to earnings.

Our methodology for assessing the appropriateness of the allowance for loan losses consists of: (1) a valuation allowance on impaired loans; and (2) a 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.

Allowance on Impaired Loans. We establish an allowance for loans that are individually evaluated and determined to be impaired. The allowance is determined by utilizing one of the three impairment measurement methods. At June 30, 2012, there were five loan relationships that were individually evaluated for impairment, of which three were considered TDRs. The three relationships that were considered TDRs at June 30, 2012 were summarized previously in the “Nonperforming Assets” section. The two relationships that were not considered TDRs are summarized as follows:

·A purchased residential mortgage relationship consisting of five loans totaling $1.2 million that has been deemed impaired due to the borrower no longer making payments. One loan with a balance of $116,000 was paid off in 2012 and the remaining five loans were in the process of foreclosure as of June 30, 2012. It was determined based on an appraisal of the underlying loan collateral that there was sufficient collateral to cover the outstanding loan balance and, therefore, a specific allowance was not established. In July 2012, the borrower paid off one loan and refinanced the remaining $994,000 balance into one loan. As a result of the refinance, the Bank improved its collateral position through cross-collateralization of the remaining four properties.

·One originated mortgage loan with a balance of $285,000 that has been deemed impaired due to the borrower declaring Chapter 13 bankruptcy and no longer making payments. It was determined based on an appraisal of the underlying loan collateral that there was sufficient collateral to cover the outstanding loan balance and, therefore, a specific allowance was not established.

Allowance on the Remainder of the Loan Portfolio. We establish another allowance for loans that are not determined to be impaired. 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 categorized 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 utilize previous years’ 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 2006, 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.

16

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. Our historical loss experience and qualitative and environmental factors are reviewed on a quarterly basis to ensure they are reflective of current conditions in our loan portfolio and economy. In 2011, the qualitative factor related to changes in adversely graded loans was adjusted to include a factor for special mention loans. The factors related to changes in the volume and severity of past due loans, nonaccrual loans and adversely graded or classified loans and changes in the value of underlying collateral for collateral dependent loans were also adjusted specifically for the purchased residential loans due to severity of the number of past due loans in this portfolio segment and the continued deterioration of property values, primarily on Michigan properties. In addition, certain historical loss factors were adjusted to place more emphasis on recent and expected loss experience while generally excluding periods where we did not experience any losses.

At June 30, 2012, the allowance for loan losses to total loans ratio was 1.20% compared to 1.21% at December 31, 2011. The decrease is primarily due to an increase in purchased residential nonperforming loans.

17

The following table summarizes the activity in the allowance for loan losses for the three and six months ended June 30, 2012 (dollars in thousands):

Real estate - mortgage

Real estate-construction

Consumer

One-to four- family residential (originated)

One-to four- family residential (purchased)

Multi- family (originated)

Multi- family (purchased)

Com- mercial

Resi- dential

Com- mercial

Home equity (loan- to-value ratio of 80% or less)

Home equity (loan- to-value ratio of greater than 80%)

Other Consumer

Com- mercial business

Unal- located

Total

Loan Balance	$	111,630		$	14,180		$	11,828		$	5,050		$	40,856		$	3,240		$	6,233		$	35,949		$	8,068	$	1,457		$	10,935					$	249,426
Allowance for loan losses:
March 31, 2012	$	576		$	435		$	37		$	123		$	922		$	6		$	13		$	377		$	249	$	21		$	204		$	140		$	3,103
Charge-offs	115			3			-			-			33			-			-			-			-		-			15			-			166
Recoveries	-			-			-			-			-			-			-			-			1		-			-			-			1
Provision	36			94			(1		)	(1		)	(101		)	(1		)	(4		)	37			13		(4		)	(17		)	(1		)	50
June 30, 2012	$	497		$	526		$	36		$	122		$	788		$	5		$	9		$	414		$	263	$	17		$	172		$	139		$	2,988
December 31, 2011	$	534		$	465		$	39		$	124		$	858		$	6		$	12		$	379		$	267	$	24		$	242		$	148		$	3,098
Charge-offs	115			109			-			-			33			-			-			-			49		-			15			-			321
Recoveries	-			-			-			-			-			-			-			-			1		-			-			-			1
Provision	78			170			(3		)	(2		)	(37		)	(1		)	(3		)	35			44		(7		)	(55		)	(9		)	210
June 30, 2012	$	497		$	526		$	36		$	122		$	788		$	5		$	9		$	414		$	263	$	17		$	172		$	139		$	2,988
Individually evaluated for impairment	$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-	$	-		$	-		$	-		$	-
Collectively evaluated on historical loss experience	147			204			-			77			105			-			-			82			110		13			2			-			740
Collectively evaluated on qualitative factors	350			322			36			45			683			5			9			332			153		4			170			-			2,109
Unallocated	-			-			-			-			-			-			-			-			-		-			-			139			139
Total allowance for loan losses	$	497		$	526		$	36		$	122		$	788		$	5		$	9		$	414		$	263	$	17		$	172		$	139		$	2,988
Percent of Allowance	16.6		%	17.6		%	1.2		%	4.1		%	26.4		%	0.2		%	0.3		%	13.9		%	8.8%		0.6		%	5.7		%	4.6		%	100.0		%
Percent of Loans (1)	44.8		%	5.7		%	4.7		%	2.0		%	16.4		%	1.3		%	2.5		%	14.4		%	3.2%		0.6		%	4.4		%				100.0		%

(1)Represents percentage of loans in each category to total loans.

18

The following table summarizes the activity in the allowance for loan losses for the three and six months ended June 30, 2011 (dollars in thousands):

Real estate - mortgage

Real estate-construction

Consumer

One-to four- family residential (originated)

One-to four- family residential (purchased)

Multi- family (originated)

Multi- family (purchased)

Com- mercial

Resi- dential

Com- mercial

Home equity (loan- to-value ratio of 80% or less)

Home equity (loan- to-value ratio of greater than 80%)

Other Consumer

Com- mercial business

Unal- located

Total

Loan Balance	$	121,348		$	18,246		$	9,303		$	5,189		$	36,022		$	7,354		$	709		$	28,182		$	8,105	$	1,930		$	11,481					$	247,869
Allowance for loan losses:
March 31, 2011	$	559		$	417		$	23		$	127		$	754		$	9		$	1		$	342		$	280	$	24		$	187		$	112		$	2,835
Charge-offs				43																																43
Recoveries	-			1			-			-			-			-			-			-			-		1			-			-			2
Provision	(6		)	17			5			(1		)	141			2			-			28			(1)		-			11			4			200
June 30, 2011	$	553		$	392		$	28		$	126		$	895		$	11		$	1		$	370		$	279	$	25		$	198		$	116		$	2,994
December 31, 2010	$	558		$	433		$	12		$	127		$	804		$	10		$	1		$	294		$	292	$	26		$	171		$	96		$	2,824
Charge-offs				275																							7									282
Recoveries	-			1			-			-			-			-			-			-			-		1			-			-			2
Provision	(5		)	233			16			(1		)	91			1			-			76			(13)		5			27			20			450
June 30, 2011	$	553		$	392		$	28		$	126		$	895		$	11		$	1		$	370		$	279	$	25		$	198		$	116		$	2,994
Individually evaluated for impairment	$	-		$	-		$	-		$	-		$	170		$	-		$	-		$	-		$	-	$	-		$	-		$	-		$	170
Collectively evaluated on historical loss experience	160			177			-			79			61			-			-			97			121		19			2			-			716
Collectively evaluated on qualitative factors	393			215			28			47			664			11			1			273			158		6			196			-			1,992
Unallocated	-			-			-			-			-			-			-			-			-		-			-			116			116
Total allowance for loan losses	$	553		$	392		$	28		$	126		$	895		$	11		$	1		$	370		$	279	$	25		$	198		$	116		$	2,994
Percent of Allowance	18.5		%	13.1		%	0.9		%	4.2		%	29.9		%	0.4		%	0.0		%	12.4		%	9.3%		0.8		%	6.6		%	3.9		%	100.0		%
Percent of Loans (1)	48.9		%	7.4		%	3.8		%	2.1		%	14.5		%	3.0		%	0.3		%	11.3		%	3.3%		0.8		%	4.6		%				100.0		%

(1)Represents percentage of loans in each category to total loans.

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Note 5.  Deposits

Deposits are summarized as follows (dollars in thousands).

	June 30, 2012				December 31, 2011
	Amount		Percent		Amount		Percent
Noninterest-bearing demand deposits	$	24,161	10.5	%	$	20,536	9.3	%
Interest-bearing demand deposits		15,164	6.6			14,555	6.6
Savings accounts		24,755	10.8			22,827	10.3
Money market accounts		67,371	29.4			59,709	27.0
Certificates of deposit		97,768	42.7			103,913	46.8
Total deposits	$	229,219	100.0	%	$	221,540	100.0	%

Note 6.  Borrowings

We utilize borrowings as a supplemental source of funds for loans and securities. The primary sources of borrowings are FHLB advances and, to a limited extent, repurchase agreements. At June 30, 2012 and December 31, 2011, we had $46.4 million and $49.9 million of borrowings, respectively, of which $43.4 million and $46.9 million, respectively were FHLB advances and $3.0 million were repurchase agreements. Our FHLB advances were comprised of fixed rate advances.

The following table sets forth borrowings based on their stated maturities and weighted average rates at the dates indicated.

	June 30, 2012					December 31, 2011
				Weighted					Weighted
				Average					Average
(Dollars in thousands)	Balance			Rate		Balance			Rate
Due in one year or less	$	8,442		3.95	%	$	8,406		4.15	%
Due in one to two years		20,967		3.63			11,497		3.68
Due in two to three years		5,000		2.94			18,000		3.41
Due in three to four years		12,000		3.82			12,000		3.82
Advances	$	46,409				$	49,903
Less: deferred premium on modification		(528	)				(614	)
Total advances	$	45,881		3.66	%	$	49,289		3.69	%

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

	Six Months		Year
	Ended		Ended
	June 30,		December 31,
(Dollars in thousands)	2012		2011
Maximum amount outstanding at any month end during the period	$       48,873		$         72,864
Average amounts outstanding during the period	47,471		58,150
Weighted average rate during the period	3.73	%	3.69	%

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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. 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.

The following table sets forth basic and diluted earnings per common share at the dates indicated.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands, except per share amounts)	2012		2011		2012		2011
Net income of FedFirst Financial Corporation	$	594	$	246	$	1,050	$	514
Weighted-average shares outstanding:
Basic	2,884,156		2,909,733		2,846,518		2,906,665
Effect of dilutive stock options and restrictive stock awards	3,053		7,274		3,016		5,438
Diluted	2,887,210		2,917,007		2,849,534		2,912,103
Earnings per share:
Basic and diluted	$	0.21	$	0.08	$	0.37	$	0.18

The dilutive effect on average shares outstanding is the result of stock options outstanding. At June 30, 2012 and June 30, 2011, options to purchase 150,017 and 104,334 shares of common stock, respectively, at a weighted average exercise price of $17.02 and $19.53 per share, respectively, were outstanding but were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares.

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 sale transaction on the dates indicated. The estimated fair value amounts have been measured as of June 30, 2012 and December 31, 2011 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 June 30, 2012 and December 31, 2011 may be different than the amounts reported at each period end.

The fair value hierarchy 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).

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The three levels of the fair value hierarchy 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 following is a discussion of assets and liabilities measured at fair value on a recurring basis and the valuation techniques used:

Securities available for sale. The majority of the Company’s securities are included in Level 2 of the fair value hierarchy. Fair values were primarily 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. The standard inputs that are normally used include benchmark yields of like securities, reportable trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. In some cases, the fair value was determined from a broker who is able to quote a price based on observable inputs in a liquid market for similar securities.

In some instances, the fair value of certain securities cannot be determined using these techniques due to the lack of relevant market data. As such, these securities are valued using an alternative technique and classified within Level 3 of the fair value hierarchy. At June 30, 2012, Level 3 includes three corporate debt securities with a fair value of $1.7 million.

The corporate debt securities are pooled trust preferred corporate debt obligations (“CDOs”) collateralized by the trust preferred securities of insurance companies in the United States. The CDOs, which were rated A at purchase and are currently rated below investment grade, 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. 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.

The Bank utilized a third party pricing service that performed a two-step process to determine the fair value of the CDOs. First, an asset analysis was performed to evaluate the credit quality of the collateral and the deal structure using probability of default values for each underlying issuer and loss given default values by asset type. Probability of default is the likelihood that the issuer of the CDOs will go into default and stop paying and was estimated using an expected default frequency approach, which considers the market value and volatility of a firm’s assets and the threshold for default. Probability of default was combined with correlation assumptions, which is the tendency of companies to default once other companies have defaulted. CDOs are more likely to experience stress at the same time since they are concentrated in the same sector, therefore a 50% asset correlation was assumed for issuers in the same industry. Loss given default is the amount of cash lost to the investor at the time of default and is related to the recovery rate. Loss and recovery estimates determine how much cash remains when an issuer goes into default. Deferrals are a common feature of CDOs and were treated as defaults in the analysis. Loss given default has been historically high for CDOs and therefore a 0% recovery rate was assumed on currently defaulted and deferring assets, which resulted in a 100% loss given default.

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Second, a liability analysis was performed in which the expected cash flows produced based off the expected credit events of the asset analysis were allocated across the tranches to determine the tranches that would get paid or incur a loss. These expected cash flows were discounted at a risk free interest rate plus a premium for illiquidity (3 month LIBOR plus 300 basis points) to produce a discounted cash flow valuation and determine an estimated fair value.

For financial assets measured at fair value on a recurring basis, the following tables set forth the fair value measurements by fair value hierarchy at the dates indicated.

(Dollars in thousands)		June 30, 2012							December 31, 2011
Significant other observable inputs (Level 2)
Securities available-for-sale
Government-sponsored enterprises				$	-					$	2,003
Municipal bonds				9,167						7,125
Mortgage-backed				16,415						17,512
REMICs				24,040						24,318
Equities				4						4
Total significant other observerable inputs (Level 2)				49,626						50,962
Significant unobservable inputs (Level 3)
Securities available-for-sale
Mortgage-backed				-						32
Corporate debt				1,654						1,454
Total significant unobservable inputs (Level 3)				1,654						1,486
Total securities available-for-sale				$	51,280					$	52,448
Total assets measured at fair value on a recurring basis				$	51,280					$	52,448
	Significant
	Unobservable Inputs
(Dollars in thousands)	(Level 3)
December 31, 2010			$			1,278
Total unrealized gains			214
Paydowns and maturities			(6					)
December 31, 2011			$			1,486
Total unrealized gains			200
Paydowns and maturities			(11					)
Net transfers out of level 3			(21					)
June 30, 2012			$			1,654
(Dollars in thousands)		June 30, 2012							December 31, 2011
The amount of total unrealized gains for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains relating to assets still held at period end			$				200			$		214

Seven mortgage-backed securities were transferred out of Level 3 and into Level 2 in 2012 because a reliable price could be obtained using a model based valuation technique or through a broker quote.

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For Level 3 assets measured at fair value on a recurring basis as of June 30, 2012, the following table sets forth the significant unobservable inputs used in the fair value measurements.

(Dollars in thousands)	Fair Value	Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Securities available-for-sale
Corporate Debt	$    1,654	Discounted cash flow	Average probability of default	4.62%
			Correlation	50% for issuers in the same industry
			Deferral/default recovery rate	0% on currently defaulted/deferring assets and projected defaults
			Prepayment	0%

We may be required to measure certain assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or writedowns of individual assets.

The following is a discussion of assets and liabilities measured at fair value on a nonrecurring basis.

Impaired loans. Certain impaired loans over $250,000 are individually reviewed to determine the amount of each loan that may be at risk of noncollection. When repayment is expected solely from the collateral, the impaired loans are reported at the fair value of the underlying collateral using Level 2 inputs based on property appraisals or financial statements.

Real estate owned. The fair value of real estate owned is estimated using Level 2 inputs based on property appraisals less any projected selling costs, which are estimated at 10-20% of the collateral value.

For financial assets measured at fair value on a nonrecurring basis, the following table sets forth the fair value measurements by fair value hierarchy at the dates indicated.

	June 30, 2012				December 31, 2011
	Carrying				Carrying
(Dollars in thousands)	Value		Fair Value		Value		Fair Value
Significant other observable inputs (Level 2)
Impaired loans	$	3,336	$	3,336	$	3,539	$	3,369
Real estate owned	234		234		544		544
Total assets measured at fair value on a nonrecurring basis	$	3,570	$	3,570	$	4,083	$	3,913

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.

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The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at June 30, 2012 and December 31, 2011.

Cash and Cash Equivalents

The carrying amounts approximate the asset’s fair values.

Securities Available-for Sale

See previous discussion on securities available-for-sale measured at fair value on a recurring basis for further details on the valuation techniques used to determine the fair value of securities available-for-sale.

Loans

The fair values for residential real estate loans are estimated using discounted cash flow analyses using mortgage commitment rates from either FNMA or FHLMC. The fair values of consumer and commercial business loans are estimated using discounted cash flow analyses, using interest rates reported in various government releases. The fair values of multi-family and commercial real estate loans are estimated using discounted cash flow analysis, using interest rates based on national commitment rates on similar loans. The carrying value is net of the allowance for loan losses. Due to the significant judgment involved in evaluating credit quality and the allowance for loan losses, loans are classified as Level 3, except for impaired loans measured at fair value on a nonrecurring basis that are classified as Level 2 based on property appraisals.

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 (e.g., 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 of 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.

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 in Part I, Item 2 of this report.

25

The following table sets forth the carrying amount and estimated fair value of financial instruments at the dates indicated (dollars in thousands).

	Carrying			Estimated		Fair Value Measurements
June 30, 2012	Amount			Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$		22,769	$	22,769	$	22,769	$	-	$	-
Securities available-for-sale	51,280			51,280		-		49,626		1,654
Loans, net	242,958			255,127		-		3,336		251,791
FHLB stock	4,819			4,819		4,819		-		-
Accrued interest receivable	1,131			1,131		1,131		-		-
Financial liabilities:
Deposits	229,219			231,248		131,451		99,797		-
Borrowings	45,881			48,226		-		48,226		-
Accrued interest payable	361			361		361		-		-
	Carrying			Estimated
December 31, 2011	Amount			Fair Value
Financial assets:
Cash and cash equivalents	$	14,571		$	14,571
Securities available-for-sale	52,448			52,448
Loans, net	245,277			256,446
FHLB stock	5,340			5,340
Accrued interest receivable	1,244			1,244
Financial liabilities:
Deposits	221,540			224,371
Borrowings	49,289			52,179
Accrued interest payable	430			430

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.

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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.		FedFirst Financial Corporation		Net Eliminations		Consolidated
June 30, 2012
Assets	$	338,723	$	843	$	58,437	$	(59,249)	$	338,754
Liabilities		291,093		263		25		(11,191)		280,190
Stockholders’ equity		47,630		580		58,412		(48,058)		58,564
December 31, 2011
Assets	$	335,151	$	1,041	$	58,787	$	(59,705)	$	335,274
Liabilities		288,645		506		26		(12,704)		276,473
Stockholders’ equity		46,506		535		58,761		(47,001)		58,801
Three Months Ended June 30, 2012
Total interest income	$	3,490	$	-	$	23	$	(23)	$	3,490
Total interest expense		987		-		-		(23)		964
Net interest income		2,503		-		23		-		2,526
Provision for loan losses		50		-		-		-		50
Net interest income after provision for loan losses		2,453		-		23		-		2,476
Noninterest income		317		559		-		-		876
Noninterest expense		1,836		515		68		-		2,419
Undistributed net gain of subsidiary		22		-		624		(646)		-
Income before income tax expense (benefit) and noncontrolling interest in net income of consolidated subsidiary		956		44		579		(646)		933
Income tax expense (benefit)		328		22		(15)		-		335
Net income before noncontrolling interest in net
loss of consolidated subsidiary		628		22		594		(646)		598
Less: Noncontrolling interest in net loss of consolidated subsidiary		4		-		-		-		4
Net income	$	624	$	22	$	594	$	(646)	$	594
Six Months Ended June 30, 2012
Total interest income	$	7,108	$	1	$	47	$	(47)	$	7,109
Total interest expense		2,067		-		-		(47)		2,020
Net interest income		5,041		1		47		-		5,089
Provision for loan losses		210		-		-		-		210
Net interest income after provision for loan losses		4,831		1		47		-		4,879
Noninterest income		530		1,185		-		-		1,715
Noninterest expense		3,720		994		209		-		4,923
Undistributed net gain of subsidiary		106		-		1,157		(1,263)		-
Income before income tax expense (benefit) and noncontrolling interest in net income of consolidated subsidiary		1,747		192		995		(1,263)		1,671
Income tax expense (benefit)		569		86		(55)		-		600
Net income before noncontrolling interest in net income of consolidated subsidiary		1,178		106		1,050		(1,263)		1,071
Less: Noncontrolling interest in net income of consolidated subsidiary		21		-		-		-		21
Net income	$	1,157	$	106	$	1,050	$	(1,263)	$	1,050

27

(Dollars in thousands)	First Federal Savings Bank		Exchange Underwriters, Inc.		FedFirst Financial Corporation		Net Eliminations		Consolidated
Three Months Ended June 30, 2011
Total interest income	$	3,912	$	1	$	26	$	(26)	$	3,913
Total interest expense		1,294		-		-		(26)		1,268
Net interest income		2,618		1		26		-		2,645
Provision for loan losses		200		-		-		-		200
Net interest income after provision for loan losses		2,418		1		26		-		2,445
Noninterest income		204		552		-		-		756
Noninterest expense		2,261		464		82		-		2,807
Undistributed net gain of subsidiary		48		-		283		(331)		-
Income before income tax expense (benefit) and noncontrolling interest in net income of consolidated subsidiary		409		89		227		(331)		394
Income tax expense (benefit)		116		41		(19)		-		138
Net income before noncontrolling interest in net income of consolidated subsidiary		293		48		246		(331)		256
Less: Noncontrolling interest in net income of consolidated subsidiary		10		-		-		-		10
Net income	$	283	$	48	$	246	$	(331)	$	246
Six Months Ended June 30, 2011
Total interest income	$	7,843	$	2	$	51	$	(51)	$	7,845
Total interest expense		2,651		-		-		(51)		2,600
Net interest income		5,192		2		51		-		5,245
Provision for loan losses		450		-		-		-		450
Net interest income after provision for loan losses		4,742		2		51		-		4,795
Noninterest income		405		1,184		1		-		1,590
Noninterest expense		4,442		935		167		-		5,544
Undistributed net gain of subsidiary		139		-		590		(729)		-
Income before income tax expense (benefit) and noncontrolling interest in net income of consolidated subsidiary		844		251		475		(729)		841
Income tax expense (benefit)		226		112		(39)		-		299
Net income before noncontrolling interest in net income of consolidated subsidiary		618		139		514		(729)		542
Less: Noncontrolling interest in net income of consolidated subsidiary		28		-		-		-		28
Net income	$	590	$	139	$	514	$	(729)	$	514

Note 10.  Other Comprehensive Income (Loss)

The following table sets forth the tax effects allocated to each component of the Company’s other comprehensive income (loss) at the dates indicated (dollars in thousands).

	Before		Income		Net of
	Income Tax		Tax		Income
Three months ended June 30, 2012	Expense		Expense		Tax
Other comprehensive income:
Unrealized gain on securities available-for-sale	$	128	$	50	$	78
	Before		Income		Net of
	Income Tax		Tax		Income
Three months ended June 30, 2011	Expense		Expense		Tax
Other comprehensive income:
Unrealized gain on securities available-for-sale,	$	457	$	180	$	277

28

	Before		Income		Net of
	Income Tax		Tax		Income
Six months ended June 30, 2012	Benefit		Benefit		Tax
Other comprehensive loss:
Unrealized loss on securities available-for-sale,	$	(169)	$	(66)	$	(103	)
	Before Income		Income Tax		Net of
	Tax Expense		Expense or		Income
Six months ended June 30, 2011	or (Benefit)		(Benefit)		Tax
Other comprehensive income (loss):
Unrealized gain on securities available-for-sale	$	1,420	$	557	$	863
Reclassification adjustment on sales of securities available-for-sale	(58)		(23)		(35		)
Other comprehensive income	$	1,362	$	534	$	828

Note 11.  Stock Based Compensation

In 2006, the Company’s stockholders approved the 2006 Equity Incentive Plan (the “2006 Plan”). The purpose of the 2006 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 2006 Plan. The 2006 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 2006 Plan reserved an aggregate number of 214,787 shares of which 153,419 may be issued in connection with the exercise of stock options and 61,367 may be issued as restricted stock.

In 2011, the Company’s stockholders approved the 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan’s details related to purpose, eligibility, and granting of shares are the same as noted above for the 2006 Plan. The 2011 Plan reserved an aggregate number of 204,218 shares of which 145,870 may be issued in connection with the exercise of stock options and 58,348 may be issued as restricted stock.

On April 2, 2012, certain directors, executive officers and key employees of the Company were awarded an aggregate of 16,240 restricted shares of common stock and 17,000 options to purchase shares of common stock. The awards vest over five years at the rate of 20% per year and the stock options have a 10 year contractual life from the date of grant. The Company’s common stock closed at $13.92 per share on April 2, 2012, which is the exercise price of the options granted on that date. The market value of the restricted stock awards was approximately $226,000, before the impact of income taxes. The estimated value of the stock options was $53,000, 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 April 2, 2012 was $3.14 using the following Black-Scholes-Merton option pricing model assumptions: expected life of seven years, expected dividend rate of 0.86%, risk-free interest rate of 1.02% and an expected volatility of 22.6%, based on historical results.

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 $41,000 for the three months ended June 30, 2012 compared to $74,000 for the three months ended June 30, 2011. For the six months ended June 30, 2012, compensation expense was $69,000 compared to $147,000 for the six months ended June 30, 2011. As of June 30, 2012, there was $527,000 of total unrecognized compensation cost related to nonvested stock-based compensation compared to $316,000 at December 31, 2011. The compensation expense at June 30, 2012 is expected to be recognized ratably over the weighted average remaining service period of 4.13 years.

29

		Stock Options
		Weighted		Weighted
	Number	Average		Average
	of	Exercise		Remaining
Stock-Based Compensation	Shares	Price		Term
Outstanding at January 1, 2012	140,119	$	16.86	6.86
Granted	17,000		13.92
Exercised or converted	-		-
Forfeited	-		-
Expired	-		-
Outstanding at June 30, 2012	157,119	$	16.54	6.72
Exercisable at June 30, 2012	78,599	$	19.71	4.54

	Stock Options			Restricted Stock Awards
	Number of	Fair-Value		Number of	Fair-Value
	Shares	Price		Shares	Price
Nonvested at December 31, 2011	64,020	$	3.55	9,632	$	13.90
Granted	17,000		3.14	16,240		13.92
Vested	(2,500)		3.14	(1,000)		15.38
Forfeited	-		-	-		-
Nonvested at June 30, 2012	78,520	$	3.47	24,872	$	13.85

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, 2011.

Forward-Looking Statements

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

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

30

General

FedFirst Financial Corporation is a stock holding company established in 2010 to be the holding company for First Federal Savings Bank. FedFirst Financial’s business activity is the ownership of the outstanding capital stock of First Federal. FedFirst Financial’s wholly owned subsidiaries are First Federal Savings Bank, a federally chartered stock savings bank, and FedFirst Exchange Corporation (“FFEC”). FFEC has an 80% controlling interest in Exchange Underwriters, Inc. Exchange Underwriters, Inc. is a full-service, independent insurance agency that offers property and casualty, commercial liability, surety and other insurance products. All significant intercompany transactions have been eliminated.

First Federal Savings Bank operates 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 eight locations in southwestern Pennsylvania. First Federal conducts insurance brokerage activities through Exchange Underwriters, Inc.

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

Balance Sheet Analysis

Assets.  Total assets at June 30, 2012 were $338.8 million, an increase of $3.5 million, or 1.0%, from total assets of $335.3 million at December 31, 2011.

Securities available-for-sale decreased $1.2 million, or 2.2%, to $51.3 million at June 30, 2012 compared to $52.4 million at December 31, 2011. The decrease was primarily the result of $10.1 million of calls and paydowns, including a $2.0 million call of a GSE security and a $665,000 partial call of a municipal bond. In addition, the securities portfolio reflects an unrealized loss of $443,000 at June 30, 2012 compared to $274,000 at December 31, 2011. This was partially offset by the purchase of $9.3 million of securities, including $4.5 million in REMICs, $2.7 million in tax exempt municipal bonds, and $2.1 million in mortgage-backed securities.

Loans, net, decreased $2.3 million, or 0.9%, to $243.0 million at June 30, 2012 compared to $245.3 million at December 31, 2011 primarily due to a decrease of $8.1 million in residential mortgage loans, $4.5 million in commercial business loans, and $1.4 million in multifamily loans, partially offset by an increase of $5.6 million in home equity loans and $5.5 million in commercial real estate loans. While the Bank continues to generate growth in commercial real estate, payoffs and paydowns of higher yielding residential real estate loans have been replaced by home equity loan originations at shorter terms and lower yields.

Liabilities.  Total liabilities at June 30, 2012 were $280.2 million, compared to $276.5 million at December 31, 2011, an increase of $3.7 million, or 1.3%.

Total deposits increased $7.7 million, or 3.5%, to $229.2 million at June 30, 2012 compared to $221.5 million at December 31, 2011. There was an increase of $7.6 million in money market accounts, $3.6 million in noninterest-bearing demand deposits, and $1.9 million in savings accounts. The increase in money market accounts is primarily from a large business customer deposit. This was partially offset by a $6.1 million decrease in certificates of deposit, primarily due to maturing certificate of deposit.

Borrowings decreased $3.4 million, or 6.9%, to $45.9 million at June 30, 2012 compared to $49.3 million at December 31, 2011 primarily due to paydowns on amortizing advances and the pay-off of a $1.0 million  matured advance.

Stockholders’ Equity.  Stockholders’ equity was $58.6 million at June 30, 2012, a decrease of $237,000 from December 31, 2011. Stockholders’ equity decreased primarily as a result of $1.1 million in purchases of the Company’s common stock as part of the Company’s stock repurchase program. In addition, there was $199,000 in dividends paid to stockholders and a $103,000 decrease in the fair value of the securities portfolio, net of tax. This was partially offset by $1.1 million of net income for the six months ended June 30, 2012.

31

Results of Operations for the Three Months Ended June 30, 2012 and 2011

Overview.  The Company had net income of $594,000 for the three months ended June 30, 2012, compared to $246,000 for the same period in 2011.

	Three Months Ended
	June 30,
(Dollars in thousands)	2012			2011
Net income of FedFirst Financial Corporation	$	594		$	246
Return on average assets	0.70		%	0.28		%
Return on average equity	4.04			1.63
Average equity to average assets	17.40			17.44

Net Interest Income.  Net interest income for the three months ended June 30, 2012 decreased $119,000, or 4.5%, to $2.5 million compared to $2.6 million for the three months ended June 30, 2011. Paydowns and payoffs of higher yielding loans and securities due to the continued historically low interest rate environment and sales of securities in the prior year resulted in a $423,000 decline in interest income. This was partially offset by interest rate reductions on deposits that resulted in a $190,000 decrease in deposits expense and payoffs on borrowings that resulted in a $114,000 decrease in borrowings expense.

Interest income decreased $423,000, or 10.8%, to $3.5 million for the three months ended June 30, 2012 compared to $3.9 million for the three months ended June 30, 2011 primarily due to decreases of 49 basis points in yield and $1.1 million in average balance on interest-earning assets. Interest income on loans decreased $221,000 due to a decrease of 48 basis points in yield, which was primarily driven by payoffs and paydowns of higher yielding residential real estate and home equity loans that were replaced by originations at lower yields. The decrease in yield on loans was partially offset by a $5.1 million increase in the average balance, primarily in home equity, multifamily and commercial real estate loans. Interest income on securities decreased $209,000 due to decreases of $17.0 million in average balance and 24 basis points in yield, primarily due to paydowns, calls and sales of higher yielding securities, which were reinvested in lower yielding securities.

Interest expense decreased $304,000, or 24.0%, to $964,000 for the three months ended June 30, 2012 compared to $1.3 million for the three months ended June 30, 2011 due to decreases of 38 basis points in cost and $12.9 million in the average balance of interest-bearing liabilities. Interest expense on deposits decreased $190,000 due to a decrease of 36 basis points in cost, primarily related to the repricing of money market accounts and maturing certificates of deposit at lower rates. Interest expense on borrowings decreased $114,000 due to a decrease of $11.2 million in the average balance, as funds generated from deposit growth and security and loan paydowns were used to reduce borrowings.

32

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 June 30,
	2012				2011
		Interest				Interest
	Average	and	Yield/		Average	and	Yield/
(Dollars in thousands)	Balance	Dividends	Cost		Balance	Dividends	Cost
Assets:
Interest-earning assets:
Loans, net (1)(2)	$ 244,359	$   3,050	4.99	%	$ 239,253	$   3,271	5.47	%
Securities (3)(4)	51,195	451	3.52		68,166	640	3.76
Other interest-earning assets	23,332	9	0.15		12,598	2	0.06
Total interest-earning assets	318,886	3,510	4.40		320,017	3,913	4.89
Noninterest-earning assets	18,860				26,370
Total assets	$ 337,746				$ 346,387
Liabilities and Stockholders’ equity:
Interest-bearing liablities:
Interest-bearing demand deposits	$   15,746	6	0.15	%	$   13,745	9	0.26	%
Savings accounts	23,972	12	0.20		22,608	28	0.50
Money market accounts	63,380	75	0.47		61,514	129	0.84
Certificates of deposit	99,715	440	1.77		106,588	557	2.09
Total interest-bearing deposits	202,813	533	1.05		204,455	723	1.41
Borrowings	46,464	431	3.71		57,694	545	3.78
Total interest-bearing liabilities	249,277	964	1.55		262,149	1,268	1.93
Noninterest-bearing liabilities	29,707				23,832
Total liabilities	278,984				285,981
Stockholders’ equity	58,762				60,406
Total liabilities and stockholders’ equity	$ 337,746				$ 346,387
Net interest income		$   2,546				$   2,645
Interest rate spread			2.85	%			2.96	%
Net interest margin			3.19				3.31
Average interest-earning assets to average interest-bearing liabilities			127.92	%			122.07	%

(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) Includes municipal bonds; yield and interest are stated on a taxable equivalent basis

33

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

	Three Months Ended June 30, 2012
	Compared To
	Three Months Ended June 30, 2011
	Increase (decrease) due to
(Dollars in thousands)	Volume			Rate			Total
Interest and dividend income:
Loans, net	$	71		$	(292	)	$	(221	)
Securities	(150		)	(39		)	(189		)
Other interest-earning assets	3			4			7
Total interest-earning assets	(76		)	(327		)	(403		)
Interest expense:
Deposits	(6		)	(184		)	(190		)
Borrowings	(104		)	(10		)	(114		)
Total interest-bearing liablities	(110		)	(194		)	(304		)
Change in net interest income	$	34		$	(133	)	$	(99	)

Provision for Loan Losses.  The provision for loan losses was $50,000 for the three months ended June 30, 2012 compared to $200,000 for the three months ended June 30, 2011. Despite an increase in net charge-offs, the provision decreased primarily due to a reduction of $170,000 in specific reserves after receiving an updated collateral appraisal. Net charge-offs were $165,000 for the three months ended June 30, 2012 compared to $41,000 for the three months ended June 30, 2011. Charge-offs in both periods were composed primarily of residential mortgage loans.

Noninterest Income.  Noninterest income increased $120,000 to $876,000 for the three months ended June 30, 2012 compared to $756,000 for the three months ended June 30, 2011. In the current period, a financed real estate owned property was paid off which resulted in the recognition of $66,000 of income that had previously been deferred. There was also a $20,000 gain on the sale of REO properties in the current period compared to an $11,000 loss in the prior period.  In addition, fees and service charge income increased $28,000 primarily due to changes in the Bank’s fee structure and related customer activity as well as the receipt of a prepayment penalty from a commercial real estate loan payoff in the current period.

34

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

	Three Months Ended
	June 30,
(Dollars in thousands)	2012		2011
Compensation and employee benefits	$	1,417	$	1,603
Occupancy	300		381
FDIC insurance premiums	54		71
Data processing	133		128
Professional services	147		224
Advertising	37		37
Stationary, printing and supplies	25		23
Telephone	13		13
Postage	30		40
Correspondent bank fees	33		38
Real estate owned expense	1		37
Amortization of intangibles	27		27
All other	202		185
Total noninterest expense	$	2,419	$	2,807

Noninterest expense decreased $388,000, or 13.8%, to $2.4 million for the three months ended June 30, 2012 compared to $2.8 million for the three months ended June 30, 2011. Compensation expense decreased $186,000 primarily due to the termination of the Company’s supplemental executive retirement plan in the fourth quarter of 2011 and a decrease in stock-based compensation expense due to the final vesting of 2006 restricted stock awards and options. Occupancy expense decreased $81,000 primarily due to fully depreciated assets, a decrease in rent due to a branch consolidation in the prior year, and a decrease in office building maintenance costs. In addition, professional services decreased $77,000 primarily due to costs associated with a branch facilities assessment in the prior period.

Income Tax Expense.  Income tax expense for the three months ended June 30, 2012 increased to $335,000 compared to $138,000 for the same period in 2011 primarily due to a $539,000 increase in income before income tax expense.

35

Results of Operations for the Six Months Ended June 30, 2012 and 2011

Overview.  The Company had net income of $1.1 million for the six months ended June 30, 2012 compared to $514,000 for the six months ended June 30, 2011.

	Six Months Ended
	June 30,
(Dollars in thousands)	2012			2011
Net income of FedFirst Financial Corporation	$	1,050		$	514
Return on average assets	0.62		%	0.30		%
Return on average equity	3.56			1.72
Average equity to average assets	17.45			17.31

Net Interest Income.  Net interest income for the six months ended June 30, 2012 decreased $156,000 to $5.1 million compared to $5.2 million for the six months ended June 30, 2011. Paydowns and payoffs of higher yielding loans and securities due to the continued historically low interest rate environment and sales of securities in the prior year resulted in a $736,000 decline in interest income.  This was partially offset by interest rate reductions on deposits that resulted in a $299,000 decrease in deposits expense and payoffs on borrowings that resulted in a $281,000 decrease in borrowings expense.

Interest income decreased $736,000, or 9.4%, to $7.1 million for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. Interest income on securities decreased $456,000  due to decreases of $19.6 million in average balance and 19 basis points in yield, primarily due to paydowns, calls and sales of higher yielding securities, which were reinvested in lower yielding securities. Interest income on loans decreased $290,000 due to a decrease of 43 basis points in yield, which was primarily driven by payoffs and paydowns of higher yielding residential real estate and home equity loans that were replaced by originations at lower yields. The decrease in yield on loans was partially offset by an $8.5 million increase in the average balance, primarily in home equity, multifamily and commercial real estate loans.

Interest expense decreased $580,000, or 22.3%, to $2.0 million for the six months ended June 30, 2012 compared to the six months ended June 30, 2011 due to decreases of 37 basis points in cost and $11.8 million in the average balance of interest-bearing liabilities. Interest expense on deposits decreased $299,000 due to a decrease of 33 basis points in cost, primarily related to the repricing of money market accounts and maturing certificates of deposit at lower rates. Interest expense on borrowings decreased $281,000 due to a decrease of $17.2 million in the average balance, as funds generated from deposit growth and security and loan paydowns were used to reduce borrowings.

36

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.

	Six Months Ended June 30,
	2012				2011
		Interest				Interest
	Average	and	Yield/		Average	and	Yield/
(Dollars in thousands)	Balance	Dividends	Cost		Balance	Dividends	Cost
Assets:
Interest-earning assets:
Loans, net (1)(2)	$ 244,570	$   6,200	5.07	%	$ 236,024	$   6,490	5.50	%
Securities (3)(4)	52,523	932	3.55		72,160	1,350	3.74
Other interest-earning assets	22,153	15	0.14		10,195	5	0.10
Total interest-earning assets	319,246	7,147	4.48		318,379	7,845	4.93
Noninterest-earning assets	19,073				25,953
Total assets	$ 338,319				$ 344,332
Liabilities and Stockholders’ equity:
Interest-bearing liablities:
Interest-bearing demand deposits	$   15,541	13	0.17	%	$   13,606	18	0.26	%
Savings accounts	23,592	25	0.21		22,216	55	0.50
Money market accounts	62,568	157	0.50		61,274	264	0.86
Certificates of deposit	101,300	940	1.86		100,493	1,097	2.18
Total interest-bearing deposits	203,001	1,135	1.12		197,589	1,434	1.45
Borrowings	47,471	885	3.73		64,687	1,166	3.61
Total interest-bearing liabilities	250,472	2,020	1.61		262,276	2,600	1.98
Noninterest-bearing liabilities	28,800				22,456
Total liabilities	279,272				284,732
Stockholders’ equity:	59,047				59,600
Total liabilities and stockholders’ equity	$ 338,319				$ 344,332
Net interest income		$   5,127				$   5,245
Interest rate spread			2.87	%			2.95	%
Net interest margin			3.21				3.29
Average interest-earning assets to average interest-bearing liabilities			127.46	%			121.39	%

(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) Includes municipal bonds; yield and interest are stated on a taxable equivalent basis

37

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

	Six Months Ended June 30, 2012
	Compared To
	Six Months Ended June 30, 2011
	Increase (decrease) due to
(Dollars in thousands)	Volume			Rate			Total
Interest and dividend income:
Loans, net	$	229		$	(519	)	$	(290	)
Securities	(352		)	(66		)	(418		)
Other interest-earning assets	8			2			10
Total interest-earning assets	(115		)	(583		)	(698		)
Interest expense:
Deposits	38			(337		)	(299		)
Borrowings	(319		)	38			(281		)
Total interest-bearing liablities	(281		)	(299		)	(580		)
Change in net interest income	$	166		$	(284	)	$	(118	)

Provision for Loan Losses.  The provision for loan losses was $210,000 for the six months ended June 30, 2012 compared to $450,000 for the six months ended June 30, 2011. The provision decreased primarily due to a reduction of $170,000 in specific reserves after receiving an updated collateral appraisal. In addition, prior period adjustments to the qualitative factors used in determining the allowance for loan losses resulted in an increase in the provision in the previous period.  Net charge-offs were $320,000 for the six months ended June 30, 2012 compared to $280,000 for the six months ended June 30, 2011. Charge-offs in both periods were composed primarily of residential mortgage loans.

Noninterest Income.  Noninterest income increased $125,000, or 7.9%, to $1.7 million for the six months ended June 30, 2012 compared to $1.6 million for the six months ended June 30, 2011. In the current period, a financed real estate owned property was paid off which resulted in the recognition of $66,000 of income that had previously been deferred. In addition, fees and service charge income increased $59,000 primarily due to changes in the Bank’s fee structure and related customer activity as well as the receipt of prepayment penalties from commercial real estate loan payoffs in the current period.

38

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

	Six Months Ended
	June 30,
(Dollars in thousands)	2012		2011
Compensation and employee benefits	$	2,794	$	3,204
Occupancy	617		735
FDIC insurance premiums	112		157
Data processing	270		252
Professional services	399		403
Advertising	74		89
Stationary, printing and supplies	49		50
Telephone	26		25
Postage	64		81
Correspondent bank fees	68		77
Real estate owned expense	13		39
Amortization of intangibles	54		55
All other	383		377
Total noninterest expense	$	4,923	$	5,544

Noninterest expense decreased $621,000, or 11.2%, to $4.9 million for the six months ended June 30, 2012 compared to $5.5 million for the six months ended June 30, 2011. Compensation expense decreased $410,000 primarily due to the termination of the Company’s supplemental executive retirement plan in the fourth quarter of 2011 and a decrease in stock-based compensation expense due to the final vesting of 2006 restricted stock awards and options. Occupancy expense decreased $118,000 primarily due to fully depreciated assets, a decrease in rent due to a branch consolidation in the prior year, and a decrease in office building maintenance costs. There was also a $45,000 decrease in insurance premiums due to the Federal Deposit Insurance Corporation’s revised assessment methodology implemented in the second quarter of 2011.

Income Tax Expense.  Income tax expense for the six months ended June 30, 2012 increased to $600,000 compared to $299,000 for the same period in 2010 primarily due to a $830,000 increase in net income before income tax expense.

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.

39

Our most liquid assets are cash and cash equivalents and interest-bearing deposits. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At June 30, 2012, cash and cash equivalents totaled $22.8 million. At June 30, 2012, securities classified as available-for-sale totaled $51.3 million, which provides an additional source of liquidity. In addition, at June 30, 2012, the maximum remaining borrowing capacity at the FHLB of Pittsburgh was approximately $128.0 million. We also have the ability to borrow from the Federal Reserve based upon eligible collateral and have two unsecured discretionary lines of credit totaling $13.0 million. At June 30, 2012 and December 31, 2011, the Bank had no borrowings with the Federal Reserve and had not taken any advances on the line of credits.

Certificates of deposit due within one year of June 30, 2012 totaled $47.8 million, or 48.9% 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.

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

	June 30,
(Dollars in thousands)	2012
Loans in process	$	4,131
Unused consumer revolving lines of credit	4,110
Unused commercial lines of credit	12,821
Commitments to originate one-to four- family residential loans	598
Commitments to originate consumer loans	619
Commitments to originate commercial loans	2,110
Total commitments outstanding	$	24,389

Capital Management.  The Bank is subject to various regulatory capital requirements administered by the Office of the Comptroller of the Currency (“OCC”), including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At June 30, 2012, we exceeded all of our regulatory capital requirements and are considered “well capitalized” under regulatory guidelines. The following table sets forth the Bank’s regulatory capital amounts and ratios, as well as the minimum amounts and ratios required to be well capitalized (dollars in thousands).

	Actual			For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action
June 30, 2012	Amount		Ratio	Amount		Ratio	Amount		Ratio
Total capital (to risk weighted assets)	$	49,101	25.34 %	$	15,503	8.00 %	$	19,379	10.00 %
Tier 1 capital (to risk weighted assets)	46,672		24.08	7,752		4.00	11,627		6.00
Tier 1 capital (to adjusted total assets)	46,672		13.83	13,502		4.00	16,877		5.00
Tangible capital (to tangible assets)	46,672		13.83	5,063		1.50	N/A		N/A
December 31, 2011	Amount		Ratio	Amount		Ratio	Amount		Ratio
Total capital (to risk weighted assets)	$	47,771	25.30 %	$	15,107	8.00 %	$	18,884	10.00 %
Tier 1 capital (to risk weighted assets)	45,401		24.04	7,553		4.00	11,330		6.00
Tier 1 capital (to adjusted total assets)	45,401		13.59	13,360		4.00	16,700		5.00
Tangible capital (to tangible assets)	45,401		13.59	5,010		1.50	N/A		N/A

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

For the six months ended June 30, 2012, we engaged in no off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Not applicable as the registrant is a smaller reporting company.

Item 4.  Controls and Procedures.

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

There has been no change in FedFirst Financial’s internal control over financial reporting during the quarter ended June 30, 2012, 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.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011, which could materially affect our business, financial condition or future results.  The risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or operating results.

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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 six months ended June 30, 2012. Based upon state of incorporation, shares of common stock are retired upon purchase.

Period	Total Number of Shares Purchased(1)		Average Price Paid per Share			Total Number of Shares Purchased as Part of the Publicly Announced Program		Maximum Number of Shares That May Yet Be Purchased Under the Program
April 1-30, 2012		15,000		$	14.02		15,000		57,500
May 1-31, 2012		10,000		14.16			10,000		47,500
June 1-30, 2012		10,000		14.25			10,000		37,500
Total		35,000		14.13			35,000

(1) On September 28, 2011, the Company announced that the board of directors had approved a program allowing the Company to repurchase up to 150,000 shares of the Company’s outstanding common stock, which was approximately 5% of outstanding shares. This repurchase program is scheduled to expire on November 2, 2012. As of June 30, 2012, 112,500 shares of the Company’s common stock had been repurchased under this program.

Item 3.  Defaults Upon Senior Securities.

Not applicable.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information.

None.

Item 6.  Exhibits.

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 Jamie L. Prah pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.0*	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive Income, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Unaudited Consolidated Financial Statements
	* Furnished, not filed.

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SIGNATURES

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

	FEDFIRST FINANCIAL CORPORATION
	(Registrant)
Date:     August 10, 2012	/s/ Patrick G. O’Brien
	Patrick G. O’Brien
	President and Chief Executive Officer
Date:     August 10, 2012	/s/ Jamie L. Prah
	Jamie L. Prah
	Senior Vice President and Chief Financial Officer
	(Principal Financial Officer and Chief Accounting Officer)

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