FedFirst Financial Corp - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - FedFirst Financial Corp	Financial_Report.xls
EX-32.2 - EXHIBIT 32.2 - FedFirst Financial Corp	exh_322.htm
EX-31.1 - EXHIBIT 31.1 - FedFirst Financial Corp	exh_311.htm
EX-31.2 - EXHIBIT 31.2 - FedFirst Financial Corp	exh_312.htm
EX-32.1 - EXHIBIT 32.1 - FedFirst Financial Corp	exh_321.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2014

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 x No o

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 x No o

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

Large accelerated filer o Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company x

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

As of August 12, 2014, the issuer had 2,318,310 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, 2014 (Unaudited) and December 31, 2013	1

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2014 and 2013 (Unaudited)	2

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2014 and 2013 (Unaudited)	3

Consolidated Statements of Changes In Stockholders’ Equity for the Six Months Ended June 30, 2014 and 2013 (Unaudited)	3

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013 (Unaudited)	4

Notes to the Unaudited Consolidated Financial Statements	5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	27

Item 3. Quantitative and Qualitative Disclosures About Market Risk.	36

Item 4. Controls and Procedures.	37

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.	37

Item 1A. Risk Factors.	37

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	38

Item 3. Defaults Upon Senior Securities.	38

Item 4. Mine Safety Disclosures	38

Item 5. Other Information.	38

Item 6. Exhibits.	39

SIGNATURES

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

AT JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013

(Dollars in thousands, except share data)	June 30, 2014			December 31, 2013
Assets:

Cash and cash equivalents:
Cash and due from banks	$	2,133		$	2,034
Interest-earning deposits		2,581			3,518
Total cash and cash equivalents		4,714			5,552

Securities available-for-sale		24,370			26,772
Loans, net		284,060			268,812
Federal Home Loan Bank ("FHLB") stock, at cost		2,632			2,589
Accrued interest receivable - loans		880			858
Accrued interest receivable - securities		126			135
Premises and equipment, net		1,470			1,852
Bank-owned life insurance		8,680			8,560
Goodwill		1,080			1,080
Real estate owned		-			126
Deferred tax assets		2,139			2,118
Other assets		804			573
Total assets	$	330,955		$	319,027

Liabilities and Stockholders' Equity:

Deposits:
Noninterest-bearing	$	31,502		$	27,247
Interest-bearing		199,975			191,985
Total deposits		231,477			219,232

Borrowings		45,818			45,591
Advance payments by borrowers for taxes and insurance		676			458
Accrued interest payable - deposits		93			107
Accrued interest payable - borrowings		89			144
Other liabilities		1,981			1,644
Total liabilities		280,134			267,176

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; 2,315,810 and 2,357,293 shares issued and outstanding		23			24
Additional paid-in-capital		30,498			31,169
Retained earnings - substantially restricted		20,902			21,528
Accumulated other comprehensive income, net of deferred tax of $176 and $40		273			62
Unearned Employee Stock Ownership Plan ("ESOP")		(950	)		(1,037	)
Total FedFirst Financial Corporation stockholders' equity		50,746			51,746
Noncontrolling interest in subsidiary		75			105
Total stockholders' equity		50,821			51,851
Total liabilities and stockholders' equity	$	330,955		$	319,027

See Notes to the Unaudited Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE

AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (UNAUDITED)

	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in thousands, except per share data)	2014			2013		2014		2013

Interest income:
Loans	$	3,050		$	3,018	$	6,052	$	5,943
Securities - taxable		155			222		321		499
Securities - tax exempt		38			38		75		76
Other interest-earning assets		26			4		41		8
Total interest income		3,269			3,282		6,489		6,526

Interest expense:
Deposits		303			361		619		745
Borrowings		227			320		501		650
Total interest expense		530			681		1,120		1,395
Net interest income		2,739			2,601		5,369		5,131

Provision for loan losses		220			165		295		165
Net interest income after provision for loan losses		2,519			2,436		5,074		4,966

Noninterest income:
Fees and service charges		159			206		297		389
Insurance commissions		918			736		1,708		1,750
Income from bank-owned life insurance		60			61		120		122
Other		9			81		20		92
Total noninterest income		1,146			1,084		2,145		2,353

Noninterest expense:
Compensation and employee benefits		1,591			1,580		3,154		3,100
Occupancy		296			278		621		578
FDIC insurance premiums		48			47		97		90
Data processing		172			160		344		325
Professional services		154			137		317		302
Advertising		110			123		247		262
Merger-related		1,387			-		1,387		-
Other		339			267		609		547
Total noninterest expense		4,097			2,592		6,776		5,204

(Loss) income before income tax (benefit) expense and noncontrolling interest in net income of consolidated subsidiary		(432	)		928		443		2,115
Income tax (benefit) expense		(185	)		342		138		693
Net (loss) income before noncontrolling interest in net income of consolidated subsidiary		(247	)		586		305		1,422
Noncontrolling interest in net income of consolidated subsidiary		29			10		47		52
Net (loss) income of FedFirst Financial Corporation	$	(276	)	$	576	$	258	$	1,370

(Loss) Earnings per share:
Basic	$	(0.12	)	$	0.24	$	0.12	$	0.56
Diluted		(0.12	)		0.23		0.11		0.55

Weighted-average shares outstanding:
Basic		2,231,561			2,446,186		2,232,304		2,450,894
Diluted		2,231,561			2,479,834		2,286,038		2,478,222

See Notes to the Unaudited Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE

THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2014			2013			2014		2013

Net (loss) income before noncontrolling interest in net income of consolidated subsidiary	$	(247	)	$	586		$	305	$	1,422

Other comprehensive income:
Unrealized gain (loss) on securities available-for-sale, net of income tax expense (benefit)		124			(116	)		211		-
Other comprehensive income (loss), net of income tax expense (benefit)		124			(116	)		211		-
Comprehensive (loss) income		(123	)		470			516		1,422
Less: Comprehensive income attributable to the noncontrolling interest in subsidiary		29			10			47		52
Comprehensive (loss) income attributable to FedFirst Financial Corporation	$	(152	)	$	460		$	469	$	1,370

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR

THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (UNAUDITED)

(Dollars in thousands, except per share data)	Common Stock		Additional Paid-in- Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Unearned ESOP			Noncontrolling Interest in Subsidiary			Total Stockholders' Equity
December 31, 2012	$	25	$	34,986		$	19,821		$	(388	)	$	(1,210	)	$	60		$	53,294
Comprehensive income:
Net income		-		-			1,370			-			-			52			1,422
Issuance of common stock (14,750 shares)		-		260			-			-			-			-			260
Purchase and retirement of common stock (55,152 shares)		-		(992	)		-			-			-			-			(992	)
ESOP shares committed to be released		-		(14	)		-			-			87			-			73
Stock-based compensation expense		-		122			-			-			-			-			122
Stock awards granted (14,750 shares)		-		(260	)		-			-			-			-			(260	)
Distribution to noncontrolling shareholder		-		-			-			-			-			(32	)		(32	)
Dividends paid ($0.10 per share)		-		-			(246	)		-			-			-			(246	)
June 30, 2013	$	25	$	34,102		$	20,945		$	(388	)	$	(1,123	)	$	80		$	53,641

(Dollars in thousands, except per share data)	Common Stock			Additional Paid-in- Capital			Retained Earnings			Accumulated Other Comprehensive Income		Unearned ESOP			Noncontrolling Interest in Subsidiary			Total Stockholders' Equity
December 31, 2013	$	24		$	31,169		$	21,528		$	62	$	(1,037	)	$	105		$	51,851
Comprehensive income:
Net income		-			-			258			-		-			47			305
Other comprehensive income, net of tax of $136		-			-			-			211		-			-			211
Purchase and retirement of common stock (41,483 shares)		(1	)		(831	)		-			-		-			-			(832	)
ESOP shares committed to be released		-			-			-			-		87			-			87
Stock-based compensation expense		-			160			-			-		-			-			160
Distribution to noncontrolling shareholder		-			-			-			-		-			(77	)		(77	)
Dividends paid ($0.39 per share)		-			-			(884	)		-		-			-			(884	)
June 30, 2014	$	23		$	30,498		$	20,902		$	273	$	(950	)	$	75		$	50,821

See Notes to the Unaudited Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX

MONTHS ENDED JUNE 30, 2014 AND 2013 (UNAUDITED)

	Six Months Ended June 30,
(Dollars in thousands)	2014			2013
Cash flows from operating activities:
Net income of FedFirst Financial Corporation	$	258		$	1,370
Adjustments to reconcile net income to net cash provided by operating activities:
Noncontrolling interest in net income of consolidated subsidiary		47			52
Provision for loan losses		295			165
Depreciation		475			150
Amortization of intangibles		8			33
Net amortization of security premiums and loan costs		113			256
Noncash expense for ESOP		87			73
Noncash expense for stock-based compensation		160			122
Increase in bank-owned life insurance		(120	)		(122	)
Refund of FDIC prepaid insurance assessment		-			643
(Increase) decrease in other assets		(283	)		552
Increase in other liabilities		268			160
Net cash provided by operating activities		1,308			3,454

Cash flows from investing activities:
Net loan originations		(15,584	)		(6,602	)
Proceeds from maturities and principal repayments of securities available-for-sale		2,677			10,807
Purchases of premises and equipment		(93	)		(58	)
(Increase) decrease in FHLB stock, at cost		(43	)		1,536
Net cash (used in) provided by investing activities		(13,043	)		5,683

Cash flows from financing activities:
Net increase (decrease) in short-term borrowings		13,140			(12,000	)
Repayments of long-term borrowings		(12,913	)		(1,801	)
Net increase in deposits		12,245			8,971
Increase (decrease) in advance payments by borrowers for taxes and insurance		218			(67	)
Purchase and retirement of common stock		(832	)		(992	)
Dividends paid		(884	)		(246	)
Distribution to noncontrolling shareholder		(77	)		(32	)
Net cash provided by (used in) financing activities		10,897			(6,167	)

Net (decrease) increase in cash and cash equivalents		(838	)		2,970
Cash and cash equivalents, beginning of period		5,552			5,874

Cash and cash equivalents, end of period	$	4,714		$	8,844

Supplemental cash flow information:
Cash paid for:
Interest on deposits and borrowings (including interest credited to deposit accounts of $633 and $780 respectively)	$	1,189		$	1,480
Income taxes		507			135

Real estate acquired in settlement of loans		-			507

See Notes to the Unaudited Consolidated Financial Statements.

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 seven locations in southwestern Pennsylvania. 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, 2013. The results of operations for the three and six months ended June 30, 2014 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.

Note 2. Proposed Merger Announcement

On April 14, 2014, CB Financial Services, Inc. (“CB Financial”), a Carmichaels, Pennsylvania based holding company for Community Bank, and FedFirst Financial announced the signing of an Agreement and Plan of Merger (“Merger Agreement”) under which FedFirst Financial will merge with and into CB Financial in a cash and stock transaction valued at approximately $54.5 million. Under the terms of the Merger Agreement, stockholders of FedFirst Financial will be entitled to elect to receive $23.00 in cash or shares of CB Financial common stock based on a fixed exchange ratio of 1.1590 shares of CB Financial common stock for each share of FedFirst Financial common stock, subject to proration to ensure that at closing 65% of the outstanding shares of FedFirst Financial common stock are exchanged for shares of CB Financial common stock and the remaining 35% are exchanged for cash. CB Financial and FedFirst Financial expect to complete the transaction in the early fourth quarter of 2014. The transaction is subject to customary closing conditions, including the receipt of regulatory approvals and approval of the merger by shareholders of FedFirst Financial. The Merger Agreement contains certain provisions under which each party has agreed to pay the other a termination fee of $2.75 million if the Merger Agreement is terminated under certain circumstances.

Community Bank, a Pennsylvania-chartered commercial bank, operates eleven offices in Greene, Allegheny and Washington Counties in southwestern Pennsylvania. At December 31, 2013, CB Financial had total consolidated assets of approximately $546.5 million.

The Company incurred $1.4 million of merger-related expenses for the three and six months ended June 30, 2014. Expenses consisted of professional services related to investment banker and legal fees, occupancy expenses related to the planned consolidation of the First Federal Peters and Washington branches into nearby Community Bank branches, and audit and accounting fees. The Company expects to incur additional expenses prior to the completion of the transaction including, but not limited to, compensation expense related to stock options and awards as well as severance and change in control agreement payments, additional investment banker, legal and other professional fees and fees related to the early termination of data processing and various other contracts.

On April 21, 2014, a class action complaint, captioned Sutton v. FedFirst Financial Corp., et al., was filed under Case No. 24C14002331, in the Circuit Court in Baltimore City, Maryland, against the Company, each of FedFirst Financial’s directors, and CB Financial. The complaint alleges, among other things, that the FedFirst Financial directors breached their fiduciary duties to FedFirst Financial and its stockholders by agreeing to sell to CB Financial without first taking steps to ensure that FedFirst Financial stockholders would obtain adequate, fair and maximum consideration under the circumstances, by agreeing to terms with CB Financial that benefit themselves and/or CB Financial without regard for the FedFirst Financial stockholders and by agreeing to terms with CB Financial that discourages other bidders. The plaintiff also alleges that CB Financial aided and abetted the FedFirst Financial directors’ breaches of fiduciary duties. The complaint seeks, among other things, an order declaring the Merger Agreement unenforceable and rescinding and invalidating the Merger Agreement, an order enjoining the defendants from consummating the merger, as well as attorneys’ and experts’ fees and certain other damages. On June 20, 2014, the Company and the individual defendants filed a Motion to Dismiss the complaint. On July 29, 2014 the plaintiff filed an amended complaint adding an additional claim that the Form S-4 filed by CB Financial in connection with the merger contains material misstatements and omissions. The Company now has until August 13, 2014 to amend its Motion to Dismiss to address the additional claims. A hearing date has not been set. The Company believes the factual allegations in the complaint, as amended, are without merit and is defending vigorously against the allegations in the complaint.

Note 3. Recent Accounting Pronouncements

ASU 2013-11 Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which provides guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss (“NOL”) carryforward, a similar tax loss, or a tax credit carryforward exists. The ASU is intended to eliminate diversity in practice resulting from a lack of guidance on this topic in current GAAP. Under the ASU, an entity generally must present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for an NOL carryforward, a similar tax loss, or a tax credit carryforward. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this ASU did not have a material impact on the Company’s financial condition and results of operation.

ASU 2014-04 Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure. In January 2014, the FASB issued ASU 2014-04, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure, to reduce diversity in practice by clarifying when an in substance repossession of foreclosure occurs, that is, when a creditor should be considered to have received physical possession of a residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The amendments in this ASU clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. The adoption of this ASU is not expected to have a material impact on the Company’s financial condition and results of operation.

ASU 2014-06 Technical Corrections and Improvements Related to Glossary Terms. In March 2014, the FASB issued ASU 2014-06, Technical Corrections and Improvements Related to Glossary Terms, to amend and clarify various master glossary terms that cover a wide range of topics in the Accounting Standards Codification. The amendments in this ASU were effective upon issuance and did not have a material impact on the Company’s financial condition and results of operations.

ASU 2014-08 Presentation of Financial Statements and Property, Plant, and Equipment. In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements and Property, Plant, and Equipment, to amend the definition of discontinued operation and requires entities to provide additional disclosures about disposal transactions that do not meet the discontinued operations criteria. The FASB issued the ASU to provide more decision-useful information to users and to elevate the threshold for a disposal transaction to qualify as a discontinued operation. This ASU is effective prospectively for all disposals (except disposals classified as held for sale before the adoption date) or components initially classified as held for sale in periods beginning on or after December 15, 2014, with early adoption permitted. The adoption of this ASU is not expected to have a material impact on the Company’s financial condition and results of operations.

ASU 2014-09 Revenue from Contracts with Customers. In May 2014, the FASB issued 2014-09 Revenue from Contracts with Customers which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue model to contracts within its scope, an entity will identify the contract(s) with a customer (step 1), identify the performance obligations in the contract (step 2), determine the transaction price (step 3), allocate the transaction price to the performance obligations in the contract (step 4), and recognize revenue when (or as) the entity satisfies a performance obligation (step 5). The ASU applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. The ASU requires entities to disclose both quantitative and qualitative information that enables users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The ASU is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2016. Early application is not permitted. The Company has not yet determined the impact the adoption of this ASU will have on its financial condition and results of operations.

ASU 2014-11 Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. In June 2014, the FASB issued ASU 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures, which changes the accounting for repurchase-to-maturity transactions and repurchase financing arrangements. The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. It also requires additional disclosures about repurchase agreements and other similar transactions. The amendments in this ASU and disclosure for certain transactions accounted for as a sale are effective for the first interim or annual period beginning after December 15, 2014. The disclosure for transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and interim periods beginning after March 15, 2015. Earlier application is prohibited. The adoption of this ASU is not expected to have a material impact on the Company’s financial condition and results of operations.

ASU 2014-12 Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period This ASU clarifies that entities should treat performance targets that can be met after the requisite service period of a share-based payment award as performance conditions that affect vesting. Therefore, an entity would not record compensation expense (measured as of the grant date without taking into account the effect of the performance target) related to an award for which transfer to the employee is contingent on the entity’s satisfaction of a performance target until it becomes probable that the performance target will be met. No new disclosures are required under the ASU. The ASU’s guidance is effective for reporting periods (including interim periods) beginning after December 15, 2015. Early adoption is permitted. In addition, all entities will have the option of applying the guidance either prospectively or retrospectively. The adoption of this ASU is not expected to have a material impact on the Company’s financial condition and results of operations.

Note 4. Securities

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

June 30, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Municipal bonds	$	7,954	$	217	$	66	$	8,105
Mortgage-backed - GSEs		6,763		524		-		7,287
REMICs		5,208		65		11		5,262
Corporate debt		3,996		-		280		3,716
Total securities available-for-sale	$	23,921	$	806	$	357	$	24,370

December 31, 2013
Municipal bonds	$	7,988	$	207	$	225	$	7,970
Mortgage-backed - GSEs		7,740		452		-		8,192
REMICs		6,946		98		25		7,019
Corporate debt		3,996		-		405		3,591
Total securities available-for-sale	$	26,670	$	757	$	655	$	26,772

The amortized cost and fair value of securities at June 30, 2014 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.

(Dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	1	$	1
Due from one to five years		2,070		2,252
Due from five to ten years		5,917		6,022
Due after ten years		15,933		16,095
Total	$	23,921	$	24,370

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
June 30, 2014	Number of Securities		Fair Value		Gross Unrealized Losses		Number of Securities		Fair Value		Gross Unrealized Losses		Number of Securities		Fair Value		Gross Unrealized Losses
Municipal bonds		-	$	-	$	-		2	$	3,855	$	66		2	$	3,855	$	66
REMICs		1		1,577		11		-		-		-		1		1,577		11
Corporate debt		-		-		-		3		3,716		280		3		3,716		280
Total securities temporarily impaired		1	$	1,577	$	11		5	$	7,571	$	346		6	$	9,148	$	357

	Less than 12 months						12 months or more						Total
December 31, 2013	Number of Securities		Fair Value		Gross Unrealized Losses		Number of Securities		Fair Value		Gross Unrealized Losses		Number of Securities		Fair Value		Gross Unrealized Losses
Municipal bonds		2	$	4,147	$	142		1	$	1,058	$	83		3	$	5,205	$	225
REMICs		3		2,532		25		-		-		-		3		2,532		25
Corporate debt		-		-		-		3		3,591		405		3		3,591		405
Total securities temporarily impaired		5	$	6,679	$	167		4	$	4,649	$	488		9	$	11,328	$	655

The Company reviews its investment portfolio on a quarterly basis for indications of other-than-temporary impairment (“OTTI”). 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.

Municipal Bonds – At June 30, 2014, the Company had two municipal bonds with an unrealized loss of $66,000 in an unrealized loss position of 12 months or more. An evaluation was performed on each bond. For one bond, there were no events to indicate deterioration in credit with unchanged, investment grade credit ratings. The Company believes the unrealized loss on this bond is due to market conditions, specifically interest rates impacting the value of the bonds. For the second bond, the credit rating was initially downgraded in 2012 primarily due to budgetary challenges and more recently in July 2013 primarily due to accreditation concerns; however the credit rating remains investment grade and the strong income indicators of the economic base and sound financial policies and practices of the municipality, and the municipality’s ability to levy a property tax that is sufficient to be used for bond payment are expected to allow it to repay debt and meet its contractual obligations. Therefore, the Company believes the unrealized loss of this bond is due to changes in market conditions. The Company does not intend to sell the bonds and it is more likely than not that the Company will not be required to sell the bonds before recovery. The Company expects to recover the entire amortized cost basis and concluded that there was no OTTI on these bonds at June 30, 2014.

Corporate Debt – At June 30, 2014, the Company had three securities that were in an unrealized loss position for 12 months or more at an amount of $280,000. These securities consist of two pools of trust preferred corporate debt obligations (“CDOs”) collateralized by the trust preferred securities of insurance companies in the United States. These securities were downgraded from their original rating issuance to below investment grade in 2009 after purchase. 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 CDOs at June 30, 2014 (dollars in thousands).

Pool	Class	Tranche	Amortized Cost		Fair Value	Unrealized Loss		S&P 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	$ 1,329		$ (171)	CCC-	16	$ 188,300	$ 32,500	$ 155,800	$ 104,044	$ 46,500
I-PreTSL II	Mezzanine	B-3		2,496	2,387		(109)	BB+	21	255,500	24,500	231,000	193,901	102,000
				$ 3,996	$ 3,716		$ (280)

(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.

These securities are evaluated for 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. None of these securities are projecting a cash flow disruption, nor have any of these securities experienced a cash flow disruption. 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). These securities have a strong credit profile based on the stress analysis which found I-PreTSL I and I-PreTSL II could withstand an immediate default of up to 30% and 44%, respectively, of the remaining performing collateral and still expect to receive all contractual cashflows. 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 was no OTTI on these securities at June 30, 2014.

In December 2013, the OCC adopted final regulations implementing section 619 of the Dodd-Frank Wall Street Reform and Protection Act, commonly known as the “Volcker Rule”, which restricts the ability of a banking entity to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund (referred to as a “covered fund”). A banking entity must divest its holding in covered funds by July 15, 2015. A covered fund is defined to include any issuer that would be an investment company under the Investment Company Act of 1940, but relies on the exemption for funds sold to fewer than 100 investors or the exemption for funds sold only to qualified purchasers. An issuer that could rely on a different exemption from the definition of investment company under the Investment Company Act would not be considered a covered fund, and therefore would not be subject to the Volcker Rule. In particular, the federal banking regulators have noted that some issuers of CDOs may qualify for exemption under Investment Company Act Rule 3a-7, which exempts non-managed fixed income funds from the definition of investment company. Therefore, if the issuer meets the requirements of Rule 3a-7, the CDOs will not be subject to the Volcker Rule. Based on our review, the CDOs held by the Bank as of June 30, 2014 satisfy all conditions for relying on the exemption under Investment Company Act Rule 3a-7, and therefore are not considered a covered fund that require divesture by July 15, 2015. The CDOs were in an unrealized loss position of $280,000 at June 30, 2014.

Other Securities – This category may include mortgage-backed securities and REMICS. At June 30, 2014, the Company had one REMIC security that was issued and backed by a Government-Sponsored Enterprise (“GSE”) with an unrealized loss of $11,000. The security was in an unrealized loss position for less than 12 months. The Company believes the unrealized loss of the security is due to changes in market interest rates or changes in market conditions as there was no indication that the issuers were having financial difficulties. The Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before its recovery. The Company expects to recover the entire amortized cost basis of the security and concluded that there was no OTTI at June 30, 2014.

Note 5. Loans

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

	June 30, 2014						December 31, 2013
	Amount			Percent			Amount			Percent
Real estate-mortgage:
One- to four-family residential
Originated	$	105,247			35.4	%	$	104,870			37.1	%
Purchased		6,076			2.0			6,888			2.4
Total one- to four-family residential		111,323			37.4			111,758			39.5

Multi-family
Originated		7,310			2.5			7,083			2.5
Purchased		3,238			1.1			3,768			1.3
Total multi-family		10,548			3.6			10,851			3.8

Commercial		69,700			23.4			61,889			21.9
Total real estate-mortgage		191,571			64.4			184,498			65.2

Real estate-construction:
Residential		3,805			1.3			3,337			1.2
Commercial		18,016			6.1			15,979			5.7
Total real estate-construction		21,821			7.4			19,316			6.9

Consumer:
Home equity
Loan-to-value ratio of 80% or less		45,826			15.4			47,543			16.9
Loan-to-value ratio of greater than 80%		9,052			3.0			9,247			3.3
Total home equity		54,878			18.4			56,790			20.2

Other		1,579			0.5			1,666			0.6
Total consumer		56,457			18.9			58,456			20.8

Commercial business		27,594			9.3			20,023			7.1
Total loans	$	297,443			100.0	%	$	282,293			100.0	%

Net premiums on loans purchased		81						93
Net deferred loan costs		322						351
Loans in process		(10,174	)					(10,617	)
Allowance for loan losses		(3,612	)					(3,308	)
Loans, net	$	284,060					$	268,812

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

	June 30, 2014						December 31, 2013
	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due
Real estate - mortgage:
One- to four-family residential
Originated	$	-	$	260	$	1,348	$	1,012	$	427	$	627
Purchased		-		-		307		-		-		307
Total one- to four-family residential		-		260		1,655		1,012		427		934
Commercial		28		-		467		30		-		493
Total real estate - mortgage		28		260		2,122		1,042		427		1,427

Real estate - construction:
Residential		-		-		-		715		-		-

Consumer:
Home equity
Loan-to-value ratio of 80% or less		17		-		66		1		-		-
Loan-to-value ratio of greater than 80%		291		-		47		144		158		30
Total home equity		308		-		113		145		158		30
Other		64		4		-		-		3		-
Total consumer		372		4		113		145		161		30

Total delinquencies	$	400	$	264	$	2,235	$	1,902	$	588	$	1,457

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

	June 30, 2014					December 31, 2013
	Number of Contracts		Amount			Number of Contracts		Amount
Nonaccrual loans:
Real estate - mortgage:
One- to four-family residential
Originated		7	$	2,306			4	$	1,595
Purchased		4		307			4		307
Total one- to four-family residential		11		2,613			8		1,902

Commercial		2		467			2		493
Total real estate - mortgage		13		3,080			10		2,395

Consumer:
Home equity
Loan-to-value ratio of 80% or less		2		66			-		-
Loan-to-value ratio of greater than 80%		2		47			1		30
Total home equity		4		113			1		30

Total nonaccrual loans		17		3,193			11		2,425

Accruing loans past due 90 days or more		-		-			-		-
Total nonaccrual loans and accruing loans past due 90 days or more		17		3,193			11		2,425
Real estate owned		-		-			1		126
Total nonperforming assets		17	$	3,193			12	$	2,551

Troubled debt restructurings
In nonaccrual status		1		958			1		968
Performing under modified terms		8		2,301			8		2,358
Troubled debt restructurings		9	$	3,259			9	$	3,326

Total nonperforming loans to total loans				1.07	%				0.86	%
Total nonperforming assets to total assets				0.96					0.80
Total nonperforming assets and troubled debt restructurings performing under modified terms to total assets				1.66					1.54

Troubled Debt Restructurings. A loan whose contractual terms have been restructured in a manner which grants a concession to a borrower experiencing financial difficulties is considered a troubled debt restructuring (“TDR”). TDRs typically are the result of our loss mitigation activities whereby concessions are granted to minimize loss and avoid foreclosure or repossession of collateral. The concessions granted for the TDRs in our portfolio primarily consist of, but are not limited to, capitalization of principal and interest due, reverting from payment of principal and interest to interest-only, or extending a maturity date through a signed forbearance agreement. Certain TDRs were placed in nonaccrual status at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period which is generally six consecutive months. Loans that were current at the time of classification remained on an accrual basis and are monitored to ensure restructured contractual terms are met.

TDRs are typically evaluated for any possible impairment similar to other impaired loans based on the current fair value of the collateral, less selling costs, for collateral dependent loans. If we determine that the value of the modified loan is less than the recorded investment in the loan, impairment is recognized through a specific allowance for loan losses. In periods subsequent to modification, we continue to evaluate all TDRs for any additional impairment and will adjust any specific allowances accordingly.

There were no loans modified as a TDR during the three and six months ended June 30, 2014 and 2013.

During the three and six months ended June 30, 2014, no loans classified as a TDR were paid off. During the three and six months ended June 30, 2013, one commercial real estate loan TDR with a balance of $76,000 was paid off.

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

June 30, 2014	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance recorded
One- to four-family originated residential	$	1,493	$	1,493	$	-	$	1,499	$	28
Commercial real estate		2,635		2,648		-		2,676		76
Home equity (loan-to-value ratio of 80% or less)		397		397		-		401		9
Total impaired loans	$	4,525	$	4,538	$	-	$	4,576	$	113

December 31, 2013	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance recorded
One- to four-family originated residential	$	1,505	$	1,505	$	-	$	1,515	$	65
Commercial real estate		2,705		2,705		-		2,742		149
Home equity (loan-to-value ratio of 80% or less)		405		405		-		409		10
Total impaired loans	$	4,615	$	4,615	$	-	$	4,666	$	224

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 amount of impairment is determined by the difference between the present value of the expected cash flows related to the loan, using current interest rates and its recorded value, or, as a practical measure in the case of collateralized loans, the difference between the fair value of the collateral and the recorded amount of the loans less estimated selling costs. At June 30, 2014, there were seven loan relationships that were individually evaluated for impairment, of which five were considered TDRs. TDR and impaired loan activity and any related specific allowances were previously discussed in the “Troubled Debt Restructurings” and “Impaired Loans” sections.

Allowance on the Remainder of the Loan Portfolio. We establish an 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 and ability to timely identify problem loans through servicer correspondence.

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

We also consider qualitative or environmental factors that are likely to cause estimated credit losses associated with the Bank’s existing portfolio to differ from historical loss experience. 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. At June 30, 2014, we utilized the three most recent years of loss history and periods where we did not experience any losses were excluded from determining the historical average loss for each loan class. Certain historical loss factors are annually adjusted when another complete year of loss history is available in order to incorporate recent loss experience in the allowance calculation.

The following table summarizes the activity in the allowance for loan losses for the three and six months ended June 30, 2014 (dollars in thousands).

	Real estate - mortgage															Real estate-construction						Consumer
	One- to four-family																					Home equity (loan- to-value ratio of
	residential						Multi-family															80%			greater			Other			Commercial
	(originated)			(purchased)			(originated)			(purchased)			Commercial			Residential			Commercial			or less)			than 80%)			Consumer			business			Unallocated			Total

Loan Balance	$	105,247		$	6,076		$	7,310		$	3,238		$	69,700		$	3,805		$	18,016		$	45,826		$	9,052		$	1,579		$	27,594					$	297,443

Allowance for loan losses:
March 31, 2014	$	418		$	275		$	113		$	34		$	1,095		$	9		$	113		$	469		$	263		$	11		$	456		$	131		$	3,387
Charge-offs		-			-			-			-			-			-			-			-			-			-			-			-			-
Recoveries		3			-			-			-			-			-			-			-			2			-			-			-			5
Provision		85			(18	)		-			(5	)		51			(3	)		37			(4	)		(2	)		(1	)		85			(5	)		220
June 30, 2014	$	506		$	257		$	113		$	29		$	1,146		$	6		$	150		$	465		$	263		$	10		$	541		$	126		$	3,612

December 31, 2013	$	432		$	286		$	114		$	34		$	1,025		$	6		$	103		$	475		$	268		$	11		$	432		$	122		$	3,308
Charge-offs		-			-			-			-			-			-			-			-			-			-			-			-			-
Recoveries		6			-			-			-			-			-			-			-			3			-			-			-			9
Provision		68			(29	)		(1	)		(5	)		121			-			47			(10	)		(8	)		(1	)		109			4			295
June 30, 2014	$	506		$	257		$	113		$	29		$	1,146		$	6		$	150		$	465		$	263		$	10		$	541		$	126		$	3,612

Collectively evaluated on historical loss experience	$	113		$	126		$	-		$	-		$	62		$	-		$	-		$	29		$	86		$	5		$	26		$	-		$	447
Collectively evaluated on qualitative factors		393			131			113			29			1,084			6			150			436			177			5			515			-			3,039
Unallocated		-			-			-			-			-			-			-			-			-			-			-			126			126

Total allowance for loan losses	$	506		$	257		$	113		$	29		$	1,146		$	6		$	150		$	465		$	263		$	10		$	541		$	126		$	3,612

Percent of Allowance		14.0	%		7.1	%		3.1	%		0.8	%		31.7	%		0.1	%		4.2	%		12.9	%		7.3	%		0.3	%		15.0	%		3.5	%		100.0	%

Percent of Loans (1)		35.4	%		2.0	%		2.5	%		1.1	%		23.4	%		1.3	%		6.1	%		15.4	%		3.0	%		0.5	%		9.3	%					100.0	%

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

The following table summarizes the activity in the allowance for loan losses for the three and six months ended June 30, 2013 (dollars in thousands).

	Real estate - mortgage															Real estate-construction						Consumer
	One- to four-family																					Home equity (loan- to-value ratio of
	residential						Multi-family															80%			greater			Other			Commercial
	(originated)			(purchased)			(originated)			(purchased)			Commercial			Residential			Commercial			or less)			than 80%)			Consumer			business			Unallocated			Total

Loan Balance	$	104,637		$	7,954		$	10,706		$	3,830		$	49,189		$	1,883		$	15,194		$	45,736		$	8,914		$	1,730		$	17,339					$	267,112

Allowance for loan losses:
March 31, 2013	$	448		$	340		$	33		$	102		$	807		$	3		$	18		$	464		$	264		$	18		$	263		$	103		$	2,886
Charge-offs		(12	)		(4	)		-			-			-			-			-			-			(35	)		-			-			-			(51	)
Recoveries		3			-			-			-			9			-			-			-			1			-			-			-			13
Provision		18			(36	)		(1	)		(9	)		37			-			5			11			54			-			22			64			165
June 30, 2013	$	457		$	300		$	32		$	93		$	853		$	3		$	23		$	475		$	284		$	18		$	285		$	167		$	2,990

December 31, 2012	$	466		$	372		$	33		$	102		$	802		$	3		$	8		$	434		$	246		$	19		$	245		$	156		$	2,886
Charge-offs		(12	)		(33	)		-			-			-			-			-			-			(35	)		-			-			-			(80	)
Recoveries		6			-			-			-			9			-			-			-			1			3			-			-			19
Provision		(3	)		(39	)		(1	)		(9	)		42			-			15			41			72			(4	)		40			11			165
June 30, 2013	$	457		$	300		$	32		$	93		$	853		$	3		$	23		$	475		$	284		$	18		$	285		$	167		$	2,990

Collectively evaluated on historical loss experience	$	130		$	134		$	-		$	58		$	97		$	-		$	-		$	65		$	111		$	13		$	10		$	-		$	618
Collectively evaluated on qualitative factors		327			166			32			35			756			3			23			410			173			5			275			-			2,205
Unallocated		-			-			-			-			-			-			-			-			-			-			-			167			167

Total allowance for loan losses	$	457		$	300		$	32		$	93		$	853		$	3		$	23		$	475		$	284		$	18		$	285		$	167		$	2,990

Percent of Allowance		15.3	%		10.0	%		1.1	%		3.1	%		28.5	%		0.1	%		0.8	%		15.9	%		9.5	%		0.6	%		9.5	%		5.6	%		100.0	%

Percent of Loans (1)		39.2	%		3.0	%		4.0	%		1.4	%		18.4	%		0.7	%		5.7	%		17.2	%		3.3	%		0.6	%		6.5	%					100.0	%

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

Credit Quality Information. Federal regulations require us to review and classify our assets on a regular basis. In addition, the Office of the Comptroller of the Currency (“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 four-family														Home equity (loan- to-value ratio of
	residential				Multi-family										80%		greater		Other		Commercial		Total
June 30, 2014	(originated)		(purchased)		(originated)		(purchased)		Commercial		Residential		Commercial		or less)		than 80%)		Consumer		business		loans
Grade:
Pass	$	102,941	$	5,769	$	5,492	$	3,238	$	66,952	$	3,805	$	18,016	$	45,163	$	9,005	$	1,579	$	25,860	$	287,820
Special Mention		-		-		1,818		-		544		-		-		-		-		-		1,734		4,096
Substandard		2,306		307		-		-		2,204		-		-		663		47		-		-		5,527
Total	$	105,247	$	6,076	$	7,310	$	3,238	$	69,700	$	3,805	$	18,016	$	45,826	$	9,052	$	1,579	$	27,594	$	297,443

	Real estate - mortgage										Real estate-construction				Consumer
	One- to four-family														Home equity (loan- to-value ratio of
	residential				Multi-family										80%		greater		Other		Commercial		Total
December 31, 2013	(originated)		(purchased)		(originated)		(purchased)		Commercial		Residential		Commercial		or less)		than 80%)		Consumer		business		loans
Grade:
Pass	$	103,275	$	6,581	$	5,231	$	3,768	$	58,311	$	3,337	$	15,979	$	46,934	$	9,217	$	1,666	$	17,964	$	272,263
Special Mention		-		-		1,852		-		676		-		-		-		-		-		2,059		4,587
Substandard		1,595		307		-		-		2,902		-		-		609		30		-		-		5,443
Total	$	104,870	$	6,888	$	7,083	$	3,768	$	61,889	$	3,337	$	15,979	$	47,543	$	9,247	$	1,666	$	20,023	$	282,293

Note 6. Deposits

Deposits are summarized as follows (dollars in thousands).

	June 30, 2014					December 31, 2013
	Amount		Percent			Amount		Percent
Noninterest-bearing demand deposits	$	31,502		13.6	%	$	27,247		12.4	%
Interest-bearing demand deposits		34,787		15.0			30,733		14.0
Savings accounts		25,094		10.8			24,415		11.1
Money market accounts		57,189		24.7			48,746		22.2
Certificates of deposit		82,905		35.9			88,091		40.3
Total deposits	$	231,477		100.0	%	$	219,232		100.0	%

Note 7. 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, 2014, we had $46.0 million of FHLB advances and at December 31, 2013, we had $45.9 million of borrowings of which $42.9 million were FHLB advances and $3.0 million were repurchase agreements. At June 30, 2014 and December 31, 2013, 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, 2014						December 31, 2013
(Dollars in thousands)	Balance			Weighted Average Rate			Balance			Weighted Average Rate
Due in one year or less	$	34,000			0.43	%	$	33,860			1.81	%
Due in one to two years		12,000			3.82			12,000			3.82
Advances	$	46,000					$	45,860
Less: deferred premium on modification		(182	)					(269	)
Total advances	$	45,818			1.32	%	$	45,591			2.34	%

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

(Dollars in thousands)	Six Months Ended June 30, 2014			Year Ended December 31, 2013
Maximum amount outstanding at any month end during the period	$	45,818		$	46,338
Average amount outstanding during the period		40,963			37,784
Weighted average rate during the period		2.45	%		3.37	%

Note 8. (Loss) Earnings Per Share

Basic (loss) 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 (loss) 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 (loss) earnings per common share at the dates indicated.

	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in thousands, except per share amounts)	2014			2013		2014		2013

Net (loss) income of FedFirst Financial Corporation	$	(276	)	$	576	$	258	$	1,370
Weighted-average shares outstanding:
Basic		2,231,561			2,446,186		2,232,304		2,450,894
Effect of dilutive stock options andrestrictive stock awards		-			33,648		53,734		27,328
Diluted		2,231,561			2,479,834		2,286,038		2,478,222

(Loss) earnings per share:
Basic	$	(0.12	)	$	0.24	$	0.12	$	0.56
Diluted		(0.12	)		0.23		0.11		0.55

The dilutive effect on average shares outstanding is the result of stock options outstanding and restricted stock. For the three months ended June 30, 2014, options to purchase 288,163 shares of common stock were considered dilutive. For the three months ended June 30, 2013, options to purchase 139,983 shares of common stock at a weighted average exercise price of $19.30 per share 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. For the six months ended June 30, 2014 and 2013, options to purchase 52,556 and 139,983 shares of common stock, respectively, at a weighted average exercise price of $21.35 and $19.30 per share, respectively, 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 9. 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 realize in a sale transaction on the dates indicated. The estimated fair value amounts were measured as of June 30, 2014 and December 31, 2013 and were not 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, 2014 and December 31, 2013 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).

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, 2014, Level 3 includes three corporate debt securities with a fair value of $3.7 million.

The corporate debt securities are pooled trust preferred 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 Company 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.

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, 2014		December 31, 2013
Significant other observable inputs (Level 2)
Securities available-for-sale
Municipal bonds	$	8,105	$	7,970
Mortgage-backed - GSEs		7,287		8,192
REMICs		5,262		7,019
Total significant other observerable inputs (Level 2)		20,654		23,181

Significant unobservable inputs (Level 3)
Securities available-for-sale
Corporate debt		3,716		3,591
Total significant unobservable inputs (Level 3)		3,716		3,591
Total securities available-for-sale	$	24,370	$	26,772

Total assets measured at fair value on a recurring basis	$	24,370	$	26,772

(Dollars in thousands)	Significant Unobservable Inputs (Level 3)
December 31, 2012	$	1,882
Total unrealized gains included in other comprehensive income		1,708
Discount accretion		1
December 31, 2013	$	3,591
Total unrealized gains included in other comprehensive income		125
June 30, 2014	$	3,716

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 property appraisals less any projected selling costs.

Real estate owned. The fair value of real estate owned is estimated using property appraisals less any projected selling costs.

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.

	December 31, 2013
(Dollars in thousands)	Carrying Value		Fair Value
Level 3
Impaired loans	$	586	$	586
Real estate owned		465		465
Total assets measured at fair value on a nonrecurring basis	$	1,051	$	1,051

For Level 3 assets measured at fair value on a recurring basis as of June 30, 2014, 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
Recurring basis
Securities available-for-sale:
Corporate debt	$	3,716	Discounted cash flow	Average probability of default	0.72%
				Correlation for issuers in the same industry	50%
				Deferral/default recovery rate on currently defaulted/deferring assets and projected defaults	0%
				Prepayment	0%

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

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at June 30, 2014 and December 31, 2013.

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.

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 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, 2014	Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	4,714	$	4,714	$	4,714	$	-	$	-
Securities available-for-sale		24,370		24,370		-		20,654		3,716
Loans, net		284,060		290,652		-		-		290,652
FHLB stock		2,632		2,632		-		2,632		-
Accrued interest receivable		1,006		1,006		-		1,006		-

Financial liabilities:
Deposits		231,477		231,833		-		231,833		-
Borrowings		45,818		46,276		-		46,276		-
Accrued interest payable		182		182		-		182		-

	Carrying		Estimated		Fair Value Measurements
December 31, 2013	Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	5,552	$	5,552	$	5,552	$	-	$	-
Securities available-for-sale		26,772		26,772		-		23,181		3,591
Loans, net		268,812		271,038		-		-		271,038
FHLB stock		2,589		2,589		-		2,589		-
Accrued interest receivable		993		993		-		993		-

Financial liabilities:
Deposits		219,232		219,538		-		219,538		-
Borrowings		45,591		46,446		-		46,446		-
Accrued interest payable		251		251		-		251		-

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).

Three Months Ended June 30, 2014	Before Income Tax Expense (Benefit)			Income Tax Expense (Benefit)			Net of Income Tax Expense (Benefit)

Other comprehensive income:
Unrealized gain on securities available-for-sale	$	204		$	80		$	124

Three Months Ended June 30, 2013

Other comprehensive loss:
Unrealized loss on securities available-for-sale	$	(191	)	$	(75	)	$	(116	)


Six Months Ended June 30, 2014

Other comprehensive income:
Unrealized gain on securities available-for-sale,	$	347		$	136		$	211

Note 11. 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.

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, 2014
Assets	$	330,851		$	1,375	$	50,853		$	(52,124	)	$	330,955
Liabilities		284,265			667		107			(4,905	)		280,134
Stockholders' equity		46,586			708		50,746			(47,219	)		50,821

December 31, 2013
Assets	$	319,381		$	1,438	$	51,773		$	(53,565	)	$	319,027
Liabilities		273,457			578		27			(6,886	)		267,176
Stockholders' equity		45,924			860		51,746			(46,679	)		51,851

Three Months Ended June 30, 2014
Total interest income	$	3,269		$	-	$	18		$	(18	)	$	3,269
Total interest expense		548			-		-			(18	)		530
Net interest income		2,721			-		18			-			2,739
Provision for loan losses		220			-		-			-			220
Net interest income after provision for loan losses		2,501			-		18			-			2,519
Noninterest income		228			918		-			-			1,146
Noninterest expense		3,311			670		116			-			4,097
Undistributed net income of subsidiary		145			-		(211	)		66			-
Income (loss) before income tax expense (benefit) and noncontrolling interest in net income of consolidated subsidiary		(437	)		248		(309	)		66			(432	)
Income tax expense (benefit)		(255	)		103		(33	)		-			(185	)
Net income (loss) before noncontrolling interest in net income of consolidated subsidiary		(182	)		145		(276	)		66			(247	)
Less: Noncontrolling interest in net income of consolidated subsidiary		29			-		-			-			29
Net income (loss) of FedFirst Financial Corporation	$	(211	)	$	145	$	(276	)	$	66		$	(276	)

Six Months Ended June 30, 2014
Total interest income	$	6,489		$	-	$	37		$	(37	)	$	6,489
Total interest expense		1,157			-		-			(37	)		1,120
Net interest income		5,332			-		37			-			5,369
Provision for loan losses		295			-		-			-			295
Net interest income after provision for loan losses		5,037			-		37			-			5,074
Noninterest income		437			1,708		-			-			2,145
Noninterest expense		5,256			1,303		217			-			6,776
Undistributed net income of subsidiary		234			-		377			(611	)		-
Income (loss) before income tax expense (benefit) and noncontrolling interest in net income of consolidated subsidiary		452			405		197			(611	)		443
Income tax expense (benefit)		28			171		(61	)		-			138
Net income (loss) before noncontrolling interest in net income of consolidated subsidiary		424			234		258			(611	)		305
Less: Noncontrolling interest in net income of consolidated subsidiary		47			-		-			-			47
Net income (loss) of FedFirst Financial Corporation	$	377		$	234	$	258		$	(611	)	$	258

(Dollars in thousands)	First Federal Savings Bank		Exchange Underwriters, Inc.		FedFirst Financial Corporation			Net Eliminations			Consolidated
Three Months Ended June 30, 2013
Total interest income	$	3,282	$	-	$	21		$	(21	)	$	3,282
Total interest expense		702		-		-			(21	)		681
Net interest income		2,580		-		21			-			2,601
Provision for loan losses		165		-		-			-			165
Net interest income after provision for loan losses		2,415		-		21			-			2,436
Noninterest income		348		736		-			-			1,084
Noninterest expense		1,866		646		80			-			2,592
Undistributed net income of subsidiary		51		-		615			(666	)		-
Income before income tax expense (benefit) and noncontrolling interest in net income of consolidated subsidiary		948		90		556			(666	)		928
Income tax expense (benefit)		323		39		(20	)		-			342
Net income before noncontrolling interest in net income of consolidated subsidiary		625		51		576			(666	)		586
Less: Noncontrolling interest in net income of consolidated subsidiary		10		-		-			-			10
Net income of FedFirst Financial Corporation	$	615	$	51	$	576		$	(666	)	$	576

Six Months Ended June 30, 2013
Total interest income	$	6,526	$	-	$	42		$	(42	)	$	6,526
Total interest expense		1,437		-		-			(42	)		1,395
Net interest income		5,089		-		42			-			5,131
Provision for loan losses		165		-		-			-			165
Net interest income after provision for loan losses		4,924		-		42			-			4,966
Noninterest income		603		1,750		-			-			2,353
Noninterest expense		3,748		1,302		154			-			5,204
Undistributed net income of subsidiary		261		-		1,444			(1,705	)		-
Income before income tax expense (benefit) and noncontrolling interest in net income of consolidated subsidiary		2,040		448		1,332			(1,705	)		2,115
Income tax expense (benefit)		544		187		(38	)		-			693
Net income before noncontrolling interest in net income of consolidated subsidiary		1,496		261		1,370			(1,705	)		1,422
Less: Noncontrolling interest in net income of consolidated subsidiary		52		-		-			-			52
Net income of FedFirst Financial Corporation	$	1,444	$	261	$	1,370		$	(1,705	)	$	1,370

Note 12. 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.

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 $80,000 for the three months ended June 30, 2014 compared to $75,000 for the three months ended June 30, 2013. For the six months ended June 30, 2014, compensation expense was $160,000 compared to $122,000 for the six months ended June 30, 2013. As of June 30, 2014, there was $1.0 million of total unrecognized compensation cost related to nonvested stock-based compensation compared to $1.2 million at December 31, 2013. The compensation expense at June 30, 2014 is expected to be recognized ratably over the weighted average remaining service period of 3.5 years.

	Stock Options
Stock-Based Compensation	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Term
Outstanding at December 31, 2013		294,081		$	16.44		7.08
Expired		(5,918	)		21.35
Outstanding at June 30, 2014		288,163		$	16.34		6.68

Exercisable at June 30, 2014		133,507		$	17.23		4.94

	Stock Options					Restricted Stock Awards
	Number of Shares			Fair-Value Price		Number of Shares			Fair-Value Price
Nonvested at December 31, 2013		175,390		$	3.37		46,715		$	16.80
Vested		(20,734	)		3.56		(7,198	)		15.65
Nonvested at June 30, 2014		154,656		$	3.34		39,517		$	17.01

Note 13. Related Parties

In 2002, the Company purchased an 80% controlling interest in Exchange Underwriters. The President of Exchange Underwriters is Richard B. Boyer, who owns the remaining 20% of Exchange Underwriters (“Shareholder”). Mr. Boyer is on the board of directors of the Company. The original stock purchase agreement between FFEC and the Shareholder includes an obligation for the Company to purchase the Shareholder’s 20% stake upon the earliest of (1) the termination of the Shareholder’s employment for any reason, (2) May 29, 2014 (the twelfth anniversary of the closing date of the stock purchase agreement), or (3) the transfer by the Shareholder of any of his shares. The Shareholder has a right of first refusal to purchase the FFEC’s interest in Exchange Underwriters prior to the FFEC selling or transferring such shares and has “tag-along” rights to participate in any sale to a buyer on the same terms and conditions as FFEC.

In connection with the execution of the Merger Agreement with CB Financial, FFEC entered into a new stock purchase agreement dated as of April 14, 2014 by and between FFEC and Richard B. Boyer, which provides for the purchase of Mr. Boyer’s interest in Exchange Underwriters for total consideration of $1.2 million immediately prior to the closing of the Company’s merger with CB Financial. FFEC also entered into an amendment to the original stock purchase agreement which extends from May 29, 2014 to June 1, 2017 the date on which FedFirst Financial is obligated to purchase Mr. Boyer’s interest in Exchange Underwriters in the event that the merger is not completed.

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, 2013.

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; the requisite shareholder or regulatory approval of the proposed merger with CB Financial may not be received or other conditions to the completion of the merger might not be satisfied or waived; operations will continue to be impacted until the merger transaction is either consummated or terminated. Additional factors that may affect our results are discussed in FedFirst Financial’s Annual Report on Form 10-K under “Item 1A. Risk Factors” and in this Quarterly Report on Form 10-Q under “Item 1A. Risk Factors.” These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements. FedFirst Financial assumes no obligation to update any forward-looking statements.

General

FedFirst Financial Corporation 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 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.

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, 2014 were $331.0 million, an increase of $11.9 million, or 3.7%, from total assets of $319.0 million at December 31, 2013. During the six months ended June 30, 2014, funds generated from deposit growth and security paydowns were used to fund loan growth.

Securities available-for-sale decreased $2.4 million, or 9.0%, to $24.4 million at June 30, 2014 compared to $26.8 million at December 31, 2013. The decrease was primarily the result of paydowns.

Loans, net, increased $15.2 million, or 5.7%, to $284.1 million at June 30, 2014 compared to $268.8 million at December 31, 2013 primarily due to increases of $7.8 million in commercial real estate loans and $7.6 million in commercial business loans as well as disbursements on constructions loans partially offset by a decrease of $1.9 million in home equity loans. The Bank continues to change the mix in the loan portfolio by emphasizing growth in commercial loans.

Liabilities. Total liabilities at June 30, 2014 were $280.1 million, compared to $267.2 million at December 31, 2013, an increase of $13.0 million, or 4.8%.

Total deposits increased $12.2 million, or 5.6%, to $231.5 million at June 30, 2014 compared to $219.2 million at December 31, 2013. There were increases of $8.4 million in money market accounts, $4.3 million in noninterest-bearing demand deposits, and $4.1 million in interest-bearing demand deposits partially offset by a decrease of $5.2 million in certificates of deposit. During the current period, municipal customers made large deposits, some of which may be temporary. In addition, due to the low interest rate environment, the Bank has been selective on promotional interest rates and has concentrated its efforts on increasing noninterest-bearing accounts by building strong customer relationships. The decrease in certificates of deposit was primarily due to customer hesitancy to commit to long-term interest rates.

Borrowings increased $227,000, or 0.5%, to $45.8 million at June 30, 2014 compared to $45.6 million at December 31, 2013. In 2014, $13.0 million of borrowings at a weighted average rate of 3.59% matured and were replaced with short-term borrowings at lower interest rates.

Stockholders’ Equity. Stockholders’ equity decreased $1.0 million to $50.8 million at June 30, 2014 compared to $51.9 million at December 31, 2013. During the period, the Company paid $884,000 in dividends to stockholders, including $567,000 related to a $0.25 per share special dividend, and purchased 41,483 shares of its common stock primarily through the Company’s completed stock repurchase program for $831,000. This was partially offset by $258,000 of net income for the six months ended June 30, 2014 and a $211,000 increase in accumulated other comprehensive income as a result of an increase in the unrealized gain position of the security portfolio.

Results of Operations for the Three Months Ended June 30, 2014 and 2013

Overview. The Company had a net loss of $276,000 for the three months ended June 30, 2014 compared to net income of $576,000 for the three months ended June 30, 2013.

	Three Months Ended
	June 30,
(Dollars in thousands)	2014			2013
Net income of FedFirst Financial Corporation	$	(276	)	$	576
Return on average assets		(0.34	) %		0.72	%
Return on average equity		(2.13	)		4.18
Average equity to average assets		15.82			17.32

Net Interest Income. Net interest income for the three months ended June 30, 2014 increased $138,000, or 5.3%, to $2.7 million compared to $2.6 million for the three months ended June 30, 2013.

Interest income decreased $13,000, or 0.4%, and remained at $3.3 million for the three months ended June 30, 2014 compared to the three months ended June 30, 2013. Interest income on securities decreased $67,000 due to a decrease of $10.1 million in average balance primarily due to paydowns of REMIC and mortgage-backed securities. Interest income on loans increased $32,000 despite the effect of a one-time receipt in the prior period of $115,000 upon payoff of an impaired, nonaccrual commercial real estate loan. Interest received while the loan was on nonaccrual was applied to principal and was not recognized to interest income until payoff. As a result of this one-time item in the prior period and originations of commercial loans at lower yields in the current period, the average yield on loans decreased 36 basis points while the average balance of loans increased $23.6 million and included a change in loan composition with increases in commercial real estate, commercial business, and home equity loans partially offset by a decrease in multi-family and residential real estate loans. Other interest income increased $22,000 primarily due to an increase in FHLB stock dividends.

Interest expense decreased $151,000, or 22.2%, to $530,000 for the three months ended June 30, 2014 compared to $681,000 for the three months ended June 30, 2013. Interest expense on borrowings decreased $93,000 due to a decrease of 132 basis points in cost from the payoff of higher cost borrowings that were replaced with lower cost, short-term borrowings. Interest expense on deposits decreased $58,000 due to a decrease of 13 basis points in cost, primarily related to the repricing of maturing certificates of deposit to lower rates, partially offset by an increase of $5.0 million in average balance, primarily in lower cost, interest-bearing demand deposits..

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,
	2014							2013
			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)	$	277,892	$	3,050		4.39	%	$	254,319	$	3,018		4.75	%
Securities (3)(4)		24,653		213		3.46			34,723		280		3.23
Other interest-earning assets		6,315		26		1.65			9,692		4		0.17
Total interest-earning assets		308,860		3,289		4.26			298,734		3,302		4.42
Noninterest-earning assets		17,979							19,250
Total assets	$	326,839						$	317,984

Liabilities and
Stockholders' equity:
Interest-bearing liablities:
Interest-bearing demand deposits	$	35,121		6		0.07	%	$	24,251		5		0.08	%
Savings accounts		25,112		3		0.05			24,626		3		0.05
Money market accounts		57,084		21		0.15			57,616		20		0.14
Certificates of deposit		85,303		273		1.28			91,174		333		1.46
Total interest-bearing deposits		202,620		303		0.60			197,667		361		0.73

Borrowings		39,321		227		2.31			35,253		320		3.63
Total interest-bearing liabilities		241,941		530		0.88			232,920		681		1.17

Noninterest-bearing liabilities		33,176							29,984
Total liabilities		275,117							262,904

Stockholders' equity		51,722							55,080
Total liabilities and
stockholders' equity	$	326,839						$	317,984

Net interest income			$	2,759						$	2,621

Interest rate spread						3.38	%						3.25	%
Net interest margin						3.57							3.51
Average interest-earning
assets to average
interest-bearing liabilities						127.66	%						128.26	%

(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.

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, 2014
	Compared To
	Three Months Ended June 30, 2013
	Increase (decrease) due to
(Dollars in thousands)	Volume			Rate			Total

Interest and dividend income:
Loans, net	$	270		$	(238	)	$	32
Securities		(86	)		19			(67	)
Other interest-earning assets		(2	)		24			22
Total interest-earning assets		182			(195	)		(13	)

Interest expense:
Deposits		8			(66	)		(58	)
Borrowings		33			(126	)		(93	)
Total interest-bearing liablities		41			(192	)		(151	)
Change in net interest income	$	141		$	(3	)	$	138

Provision for Loan Losses. The provision for loan losses was $220,000 for the three months ended June 30, 2014 compared to $165,000 for the three months ended June 30, 2013. In the current period, the provision was impacted by commercial loan growth. Net recoveries for the three months ended June 30, 2014 were $5,000 compared to net charge-offs of $38,000 for the three months ended June 30, 2013.

Noninterest Income. Noninterest income increased $62,000, or 5.7%, to $1.1 million for the three months ended June 30, 2014 and remained comparable to the three months ended June 30, 2013. Insurance commissions increased $182,000 primarily due to increases in contingency fee income and, to a lesser extent, commissions on commercial policies. This was partially offset by a $72,000 decrease in other noninterest income primarily due to the recognition of deferred income in the prior period from the payoff of a previously refinanced real estate owned property. In addition, fees and service charges income decreased $47,000 primarily due to prepayment fees received in the prior year from commercial loan payoffs.

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

	Three Months Ended
	June 30,
(Dollars in thousands)	2014		2013
Compensation and employee benefits	$	1,591	$	1,580
Occupancy		296		278
FDIC insurance premiums		48		47
Data processing		172		160
Professional services		154		137
Advertising		110		123
Merger-related		1,387		-
Supplies		19		21
Telephone		12		12
Postage		30		26
Correspondent bank fees		15		11
Real estate owned		70		(8	)
Amortization of intangibles		3		9
All other		190		196
Total noninterest expense	$	4,097	$	2,592

Noninterest expense increased $1.5 million, or 58.1%, to $4.1 million for the three months ended June 30, 2014 compared to $2.6 million for the three months ended June 30, 2013 primarily due to $1.4 million of merger-related expenses. Refer to Note 12 for further information on merger-related expenses. In addition, real estate owned expense increased $78,000 primarily due to a $75,000 loss on sale of a real estate owned property in the current period.

Income Tax (Benefit) Expense. Income tax benefit for the three months ended June 30, 2014 was $185,000 compared to expense of $342,000 for the three months ended June 30, 2013, a decrease $527,000 primarily due to a $1.4 million decrease in net income before income tax expense. The effective tax rate was 42.8% for the three months ended June 30, 2014 compared to 36.9% for the three months ended June 30, 2013.

Results of Operations for the Six Months Ended June 30, 2014 and 2013

Overview. The Company had net income of $258,000 for the six months ended June 30, 2014 compared to $1.4 million for the six months ended June 30, 2013.

	Six Months Ended
	June 30,
(Dollars in thousands)	2014			2013
Net income of FedFirst Financial Corporation	$	258		$	1,370
Return on average assets		0.16	%		0.86	%
Return on average equity		1.00			5.01
Average equity to average assets		15.96			17.25

Net Interest Income. Net interest income for the six months ended June 30, 2014 increased $238,000, or 4.6%, to $5.4 million compared to $5.1 million for the six months ended June 30, 2013.

Interest income decreased $37,000, or 0.6%, to $6.5 million for the six months ended June 30, 2014 and remained comparable to the six months ended June 30, 2013. Interest income on securities decreased $179,000 due to a decrease of $12.4 million in average balance primarily due to paydowns of REMIC and mortgage-backed securities. Interest income on loans increased $109,000, despite the effect of a one-time receipt in the prior period of $115,000 upon payoff of an impaired, nonaccrual commercial real estate loan. Interest received while the loan was on nonaccrual was applied to principal and was not recognized to interest income until payoff. As a result of this one-time item in the prior period and originations of commercial loans at lower yields in the current period, the average yield on loans decreased 30 basis points while the average balance of loans increased $22.0 million and included a change in loan composition with increases in commercial real estate, commercial business, and home equity loans partially offset by a decrease in residential and multi-family real estate loans. Other interest income increased $33,000 primarily due to an increase in FHLB stock dividends.

Interest expense decreased $275,000, or 19.7%, to $1.1 million for the six months ended June 30, 2014 compared to $1.4 million for the six months ended June 30, 2013. Interest expense on borrowings decreased $149,000 due to a decrease of 86 basis points in cost from the payoff of higher cost borrowings that were replaced with lower cost, short-term borrowings. Interest expense on deposits decreased $126,000 due a decrease of 15 basis points in cost, primarily related to the repricing of maturing certificates of deposit to lower rates, partially offset by an increase of $4.4 million in average balance, primarily in lower cost, interest-bearing demand deposits.

	Six Months Ended June 30,
	2014							2013
			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)	$	273,796	$	6,052		4.42	%	$	251,770	$	5,943		4.72	%
Securities (3)(4)		25,306		435		3.44			37,667		614		3.26
Other interest-earning assets		6,412		41		1.28			8,651		8		0.18
Total interest-earning assets		305,514		6,528		4.27			298,088		6,565		4.40
Noninterest-earning assets		17,569							18,884
Total assets	$	323,083						$	316,972

Liabilities and
Stockholders' equity:
Interest-bearing liablities:
Interest-bearing
demand deposits	$	34,046		13		0.08	%	$	21,513		9		0.08	%
Savings accounts		24,879		6		0.05			24,557		6		0.05
Money market accounts		53,116		39		0.15			56,402		41		0.15
Certificates of deposit		86,417		561		1.30			91,613		689		1.50
Total interest-bearing deposits		198,458		619		0.62			194,085		745		0.77

Borrowings		40,963		501		2.45			39,279		650		3.31
Total interest-bearing liabilities		239,421		1,120		0.94			233,364		1,395		1.20

Noninterest-bearing liabilities		32,108							28,936
Total liabilities		271,529							262,300

Stockholders' equity:		51,554							54,672
Total liabilities and
stockholders' equity	$	323,083						$	316,972

Net interest income			$	5,408						$	5,170

Interest rate spread						3.33	%						3.20	%
Net interest margin						3.54							3.47
Average interest-earning
assets to average
interest-bearing liabilities						127.61	%						127.74	%

(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.

	Six Months Ended June 30, 2014
	Compared To
	Six Months Ended June 30, 2013
	Increase (decrease) due to
(Dollars in thousands)	Volume			Rate			Total

Interest and dividend income:
Loans, net	$	501		$	(392	)	$	109
Securities		(211	)		32			(179	)
Other interest-earning assets		(3	)		36			33
Total interest-earning assets		287			(324	)		(37	)

Interest expense:
Deposits		23			(149	)		(126	)
Borrowings		26			(175	)		(149	)
Total interest-bearing liablities		49			(324	)		(275	)
Change in net interest income	$	238		$	-		$	238

Provision for Loan Losses. The provision for loan losses was $295,000 for the six months ended June 30, 2014 compared to $165,000 for the six months ended June 30, 2013. In the current period, the provision was impacted by commercial loan growth. Net recoveries for the six months ended June 30, 2014 were $9,000 compared to net charge-offs of $61,000 for the six months ended June 30, 2013.

Noninterest Income. Noninterest income decreased $208,000, or 8.8%, to $2.1 million for the six months ended June 30, 2014 compared to $2.4 million for the six months ended June 30, 2013. Fees and service charges income decreased $92,000 primarily due to prepayment fees received in the prior year from commercial loan payoffs. Other noninterest income decreased $72,000 primarily due to the recognition of deferred income in the prior period from the payoff of a previously refinanced real estate owned property. In addition, insurance commissions decreased $42,000 primarily due to a decrease in contingency fee income partially offset by an increase in commissions on commercial policies.

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

	Six Months Ended
	June 30,
(Dollars in thousands)	2014		2013
Compensation and employee benefits	$	3,154	$	3,100
Occupancy		621		578
FDIC insurance premiums		97		90
Data processing		344		325
Professional services		317		302
Advertising		247		262
Merger-related		1,387		-
Supplies		41		42
Telephone		24		24
Postage		60		60
Correspondent bank fees		26		20
Real estate owned		67		(15	)
Amortization of intangibles		8		33
All other		383		383
Total noninterest expense	$	6,776	$	5,204

Noninterest expense increased $1.6 million, or 30.2%, to $6.8 million for the six months ended June 30, 2014 compared to $5.2 million for the six months ended June 30, 2013 primarily due to $1.4 million of merger-related expenses. Refer to Note 12 for further information on merger-related expenses. Real estate owned expense increased $82,000 primarily due to a $75,000 loss on the sale of a real estate owned property in the current period. Compensation and employee benefits expense increased $54,000 primarily due to an increase in stock-based and employee benefit expenses. Occupancy expenses increased $43,000 primarily due to strategic branch initiatives.

Income Tax Expense. Income tax expense for the six months ended June 30, 2014 decreased $555,000 to $138,000 compared to $693,000 for the six months ended June 30, 2013 primarily due to a $1.7 million decrease in net income before income tax expense. The effective tax rate was 31.2% for the six months ended June 30, 2014 compared to 32.8% for the six months ended June 30, 2013.

Liquidity and Capital Management

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

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

Our most liquid assets are cash and cash equivalents and interest-bearing deposits. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At June 30, 2014, cash and cash equivalents totaled $4.7 million and unpledged securities available-for-sale, which provides an additional source of liquidity, totaled $19.0 million. In addition, at June 30, 2014, the maximum remaining borrowing capacity at the FHLB of Pittsburgh was approximately $115.4 million. We also have the ability to borrow from two unsecured discretionary lines of credit totaling $13.0 million. At June 30, 2014 and December 31, 2013, the Bank had no advances on the lines of credit.

Certificates of deposit due within 12 months of June 30, 2014 totaled $44.9 million, or 54.2% of certificates of deposit. If these maturing deposits do not remain with us, we will be required to seek other sources of funds including other certificates of deposit and borrowings. We believe, however, based on past experience that a significant portion of our maturing certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Capital Management. The Bank is subject to various regulatory capital requirements administered by the 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, 2014 and December 31, 2013, 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).

											To Be Well
						For Capital					Capitalized
						Adequacy					Under Prompt
	Actual					Purposes					Corrective Action
June 30, 2014	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital (to risk weighted assets)	$	47,999		20.90	%	$	18,370		8.00	%	$	22,962		10.00	%
Tier 1 capital (to risk weighted assets)		45,120		19.65			9,185		4.00			13,777		6.00
Tier 1 capital (to adjusted total assets)		45,120		13.70			13,174		4.00			16,467		5.00
Tangible capital (to tangible assets)		45,120		13.70			4,940		1.50			N/A		N/A

December 31, 2013	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital (to risk weighted assets)	$	47,346		21.84	%	$	17,341		8.00	%	$	21,676		10.00	%
Tier 1 capital (to risk weighted assets)		44,629		20.59			8,670		4.00			13,006		6.00
Tier 1 capital (to adjusted total assets)		44,629		14.06			12,697		4.00			15,872		5.00
Tangible capital (to tangible assets)		44,629		14.06			4,761		1.50			N/A		N/A

Off-Balance Sheet Arrangements. The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its customers and to reduce its own exposure to fluctuations in interest rates. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. In accordance with generally accepted accounting principles, these financial instruments are not recorded in our financial statements. The following table summarizes the Company’s commitments at the date indicated. The Company utilizes standby letters of credit through the FHLB to secure public deposits.

	June 30,
(Dollars in thousands)	2014
Loans in process	$	10,174
Standby letters of credit		20,515
Unused consumer revolving lines of credit		4,879
Unused commercial lines of credit		12,484
Commitments to originate one-to four- family residential loans		7,404
Commitments to originate consumer loans		195
Commitments to originate commercial loans		3,887
Total commitments outstanding	$	59,538

For the three months ended June 30, 2014, we engaged in no off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operation 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, 2014, 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 other 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, 2013, 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.

The proposed merger with CB Financial may not be completed or the Merger Agreement may be terminated in accordance with its terms, which could adversely affect our business and results of operation.

The Merger Agreement is subject to a number of conditions that must be fulfilled to complete the merger. Those conditions include: approval of the Merger Agreement by our stockholders, receipt of requisite regulatory approvals, the continued accuracy of the representations and warranties by both parties and the performance by both parties of their covenants and agreements, and the receipt by both parties of legal opinions from their respective tax counsels. If these conditions to the closing of the merger are not fulfilled, then the merger may not be completed.

Furthermore, the parties can mutually decide to terminate the Merger Agreement at any time, before or after FedFirst Financial stockholder approval or CB Financial may elect to terminate the Merger Agreement in certain other circumstances. If the Merger Agreement is terminated, our business may be adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management and the board of directors on the merger. In addition, if the Merger Agreement is terminated, the market price of our common stock might decline to the extent that the current market price reflects a market assumption that the merger will be completed. If the Merger Agreement is terminated and our board of directors seeks another merger or business combination, our stockholders cannot be certain that we will be able to find a party willing to offer equivalent or more attractive consideration than the consideration we are receiving in this merger. If the Merger Agreement is terminated under certain circumstances, we may be required to pay a termination fee of $2.75 million to CB Financial.

In connection with the proposed merger, we have incurred and will continue to incur expenses, which could prove to be significant. Our business and our operating and financial results may be materially adversely affected by the expenses incurred in connection with the proposed merger. A failed transaction may result in negative publicity and a negative impression of us in the investment community. There can be no assurance that our business, these relationships or our financial condition will not be negatively impacted, as compared to the condition prior to the announcement of the merger, if the merger is not consummated.

We will be subject to business uncertainties while the merger is pending.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on us and consequently on CB Financial. These uncertainties may impair our ability to attract, retain and motivate key personnel until the merger is completed and could cause customers and others that deal with us to seek to change existing business relationships with us. Retention of certain employees may be challenging during the pendency of the merger, as certain employees may experience uncertainty about their future roles. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the business, our business could be negatively impacted.

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

The Company made the following purchases of its common stock during the three months ended June 30, 2014. 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, 2014			283			$	20.30				-				-

(1)	In April 2014, the Company purchased 283 shares that were not made pursuant to a publicly announced program. It was the Company’s obligation to purchase shares from participants in the Company’s Equity Incentive Plan to cover income taxes on vested shares.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

2.1	Agreement and Plan of Merger dated as of April 14, 2014, by and between FedFirst Financial Corporation and CB Financial Services, Inc., incorporated by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 16, 2014.

10.1	Amendment No. 1 to Stock Purchase Agreement dated as of May 29, 2002, by and between FedFirst Exchange Corporation and Richard B. Boyer, incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 16, 2014.

10.2	Stock Purchase Agreement dated as of April 14, 2014 by and between FedFirst Exchange Corporation and Richard B. Boyer, incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on April 16, 2014.

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, 2014, 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, (iv) the Consolidated Statements of Comprehensive Income, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to the Unaudited Consolidated Financial Statements

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 13, 2014	/s/ Patrick G. O’Brien
		Patrick G. O’Brien
		President and Chief Executive Officer

Date:	August 13, 2014	/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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