First Advantage Bancorp - FORM 10-Q

Attached files

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EX-31.2 - CFO CERTIFICATION - First Advantage Bancorp	cfo033111.htm
EX-31.1 - CEO CERTIFICATION - First Advantage Bancorp	ceo033111.htm
EX-32.0 - 906 CERTIFICATION - First Advantage Bancorp	sect906033111.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

[ ] 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: 001-33682

FIRST ADVANTAGE BANCORP

(Exact name of registrant as specified in its charter)

Tennessee (State or other jurisdiction of incorporation or organization)	26-0401680 (I.R.S. Employer Identification No.)
1430 Madison Street, Clarksville, Tennessee (Address of principal executive offices)	37040 (Zip Code)

Registrant’s telephone number, including area code: (931) 552-6176

Former name, former address and former fiscal year, if changed since last report. N/A

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 ___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ___ No ___

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

(Check one): Large Accelerated Filer [ ] Accelerated Filer [ ]

Non-accelerated Filer [ ] Smaller Reporting Company [ X ]

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

The number of shares outstanding of the registrant’s common stock as of May 16, 2011 was 4,632,494.

FIRST ADVANTAGE BANCORP

Table of Contents

		Page
	Part I. Financial Information

Item 1.	Condensed Consolidated Balance Sheets as of March 31, 2011 (unaudited) and December 31, 2010	1
	Unaudited - Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2011 and 2010	2
	Unaudited - Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2011 and 2010	3
	Unaudited - Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
	Part II. Other Information
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	(Removed and Reserved)	35
Item 5.	Other Information	35
Item 6.	Exhibits	36

	SIGNATURES	37

First Advantage Bancorp
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share and per share amounts)
	March 31,			December 31,
	2011			2010
	(Unaudited)
Assets
Cash and due from banks	$	4,391		$	4,151
Interest-bearing demand deposits with banks		6,904			1,387
Federal funds sold		425			2,250
Cash and cash equivalents		11,720			7,788

Available-for-sale securities, at fair value		69,004			74,214
Other investments		1,992			3,486
Loans held for sale		1,239			3,155
Loans, net of allowance for loan losses of $3,911 and $3,649 at March 31, 2011 and December 31, 2010, respectively		239,088			238,346
Premises and equipment, net		7,538			7,553
Other real estate owned and repossessed assets		115			663
Federal Home Loan Bank stock		2,988			2,988
Accrued interest receivable		1,435			1,420
Income taxes receivable		1,977			1,515
Deferred tax asset		2,158			2,199
Other assets		2,434			1,925
Total assets	$	341,688		$	345,252

Liabilities and Shareholders' Equity

Liabilities
Deposits
Demand	$	22,605		$	19,681
Savings, checking and money market		122,123			120,859
Time certificates		74,271			78,964
Total deposits		218,999			219,504

Securities sold under agreement to repurchase		5,425			6,215
Federal Home Loan Bank advances		13,000			13,000
Borrowings with other banks		35,000			35,000
Interest payable and other liablilities		2,050			4,806
Total liabilities		274,474			278,525
Commitments and contingencies		-			-

Shareholders' Equity
Preferred stock, $0.01 par value, 10,000,000 shares authorized no shares outstanding at March 31, 2011 or December 31, 2010		-			-
Common stock, $0.01 par value 50,000,000 shares authorized, 4,632,494 shares issued and 4,107,361 outstanding at March 31, 2011 and 4,632,494 shares issued and 4,107,818 outstanding at December 31, 2010		46			46
Additional paid-in-capital		46,953			46,626
Common stock acquired by benefit plans:
Restricted stock		(1,107	)		(1,085	)
Common stock held by:
Employee Stock Ownership Plan trust		(3,198	)		(3,198	)
Benefit plans		(2,166	)		(2,159	)
Retained earnings		24,047			23,923
Accumulated other comprehensive income		2,639			2,574
Total shareholders' equity		67,214			66,727
Total liabilities and shareholders' equity	$	341,688		$	345,252
See accompanying notes to unaudited condensed consolidated financial statements.

First Advantage Bancorp
Unaudited - Condensed Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
	Three Months Ended
	March 31,
	2011		2010
Interest and dividend income
Loans	$	3,527	$	3,220
Investment securities		777		1,090
Other		66		55
Total interest and dividend income		4,370		4,365
Interest expense
Deposits		591		914
Borrowings		438		443
Total interest expense		1,029		1,357
Net interest income		3,341		3,008
Provision for loan losses		255		227
Net interest income after provision for loan losses		3,086		2,781
Noninterest income
Service charges on deposit accounts and other fees		282		306
Loan servicing and other fees		17		21
Net gains on sales of mortgage loans held for sale		207		221
Net realized gain on sales of available-for-sale securities		-		7
Insurance and brokerage commissions		26		45
Other		47		4
Total noninterest income		579		604
Noninterest expense
Salaries and employee benefits		1,732		1,543
Net occupancy expense		166		168
Equipment expense		187		176
Data processing fees		223		227
Professional fees		184		101
Marketing expense		76		65
Office expense		72		72
Loan collection and repossession expense		-		77
Other		477		453
Total noninterest expense		3,117		2,882
Income before income taxes		548		503
Provision for income taxes		190		176
Net income	$	358	$	327
Per common share:
Basic net income per common share	$	0.09	$	0.07
Diluted net income per common share	$	0.08	$	0.07
Dividends declared per common share	$	0.05	$	0.05
Basic weighted average common shares outstanding		4,107,813		4,507,228
Diluted weighted average common shares outstanding		4,260,723		4,535,405
See accompanying notes to unaudited condensed consolidated financial statements.

First Advantage Bancorp
Unaudited - Condensed Consolidated Statements of Shareholders' Equity
Three Months Ended March 31, 2011 and 2010
(Dollars in thousands, except share and per share amounts)
															Common			Accumulated
									Additional						Stock			Other		Total
	Comprehensive		Common Stock						Paid-in			Retained			Acquired by			Comprehensive		Shareholders'
	Income		Shares			Stock			Capital			Earnings			Benefit Plans			Income		Equity
Balance at January 1, 2010				5,171,395		$	52		$	51,915		$	23,210		$	(7,106	)	$	2,455	$	70,526
Comprehensive income, net of tax:
Net income	$	327					-			-			327			-			-		327
Change in unrealized appreciation of available-for-sale securities, net of tax		100					-						-			-			100		100
Total comprehensive income	$	427					-			-			-			-			-		427
Treasury stock purchase/retire				(203,900	)		(2	)		(2,164	)										(2,166	)
Dividends paid ($0.05 per common share)							-						(261	)		-			-		(261	)
Stock-based compensation							-			284			-			-			-		284
Balance at March 31, 2010				4,967,495		$	50		$	50,035		$	23,276		$	(7,106	)	$	2,555	$	68,810

Balance at January 1, 2011				4,632,494		$	46		$	46,626		$	23,923		$	(6,442	)	$	2,574	$	66,727
Comprehensive income, net of tax:
Net income	$	358					-			-			358			-			-		358
Change in unrealized appreciation of available-for-sale securities, net of tax		65																	65		65
Total comprehensive income	$	423					-			-			-			-			-		423
Dividends paid ($0.05 per common share)							-			-			(234	)		-			-		(234	)
Stock-based compensation										327											327
Purchase of restricted stock plan shares							-			-			-			(29	)		-		(29	)
Balance at March 31, 2011				4,632,494		$	46		$	46,953		$	24,047		$	(6,471	)	$	2,639	$	67,214
See accompanying notes to unaudited condensed financial statements.

First Advantage Bancorp
Unaudited - Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
	Three Months Ended
	March 31,
	2011	2010
Operating activities
Net income	$ 358	$ 327
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Provision for loan losses	255	227
Depreciation, amortization and accretion	201	202
Funding of mortgage loans held for sale	(8,699)	(10,304)
Proceeds from sales of mortgage loans held for sale	10,822	11,367
Net gains on sales of mortgage loans held for sale	(207)	(221)
Net realized gain on available-for-sale securities	-	(7)
Stock-based compensation	327	284
(Increase) decrease in other assets	(3,171)	18
(Decrease) increase in other liabilities	(36)	2,550
Net cash (used in) provided by operating activities	(150)	4,443

Investing activities
Purchases of securities available for sale	-	(3,000)
Proceeds from sales of securities available-for-sale	-	4,323
Proceeds from maturities of other investments	1,494	-
Proceeds from call/maturities and repayments of securities available-for-sale	5,271	9,171
Net increase in loans	(997)	(17,059)
Purchases of premises and equipment	(141)	(67)
Proceeds from sale of other real estate owned and repossessed assets	13	168
Net cash provided by (used in) investing activities	5,640	(6,464)

Financing activities
Net increase in demand deposits, money market, checking and savings accounts	4,188	3,637
Net decrease in time deposits	(4,693)	(2,659)
Net decrease in repurchase agreement and other short-term borrowings	(790)	(1,121)
Cash paid for dividends	(234)	(261)
Stock repurchased/retired - repurchase program	-	(2,166)
Stock purchased - restricted stock compensation plans	(29)	-
Net cash used in financing activities	(1,558)	(2,570)
Increase (decrease) in cash and cash equivalents	3,932	(4,591)
Cash and cash equivalents, beginning of period	7,788	11,865
Cash and cash equivalents, end of period	$ 11,720	$ 7,274
Supplemental cash flow information:
Other real estate owned acquired through foreclosure of real estate loans	-	647

See accompanying notes to unaudited condensed consolidated financial statements.

Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated interim financial statements include the accounts of First Advantage Bancorp (the “Company”), First Federal Savings Bank (“First Federal” or the “Bank”) and the Bank’s subsidiaries. First Federal is a federally chartered savings bank originally founded in 1953 and is headquartered in Clarksville, Tennessee. The Company uses the premises, equipment and other property of First Federal with the payment of appropriate rental fees, as required by applicable laws and regulations, under the terms of an expense allocation agreement. Accordingly, the information set forth in this interim report, including the condensed consolidated financial statements and related financial data contained herein relates primarily to First Federal. These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows for reporting the interim periods have been included. The results of operations for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the full fiscal year or any other interim period. The condensed consolidated financial statements and notes thereto included in this report should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 filed with the United States Securities and Exchange Commission (the “SEC”) on March 7, 2011.

Certain reclassifications considered to be immaterial have been made to prior period consolidated financial statements to conform to the current period consolidated financial statements.

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.

NOTE 2 – RECENT ACCOUNTING UPDATES

In January 2011, the FASB issued ASU No. 2011-01, “Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20.” The provisions of ASU No. 2010-20 required the disclosure of more granular information on the nature and extent of troubled debt restructurings and their effect on the allowance for loan and lease losses effective for the Company’s reporting period ended March 31, 2011. The amendments in ASU No. 2011-01 defer the effective date related to these disclosures, enabling creditors to provide such disclosures after the FASB finalizes its guidance for determining what constitutes a troubled debt restructuring. As the provisions of this ASU only defer the effective date of disclosure requirements related to troubled debt restructurings, the adoption of this ASU will have no impact on the Company’s statements of income and condition.

In April 2011, the FASB issued ASU No. 2011-02, “A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring.” The provisions of ASU No. 2011-02 provide additional guidance related to determining whether a creditor has granted a concession, include factors and examples for creditors to consider in evaluating whether a restructuring results in a delay in payment that is insignificant, prohibit creditors from using the borrower’s effective rate test to evaluate whether a concession has been granted to the borrower, and add factors for creditors to use in determining whether a borrower is experiencing financial difficulties. A provision in ASU No. 2011-02 also ends the FASB’s deferral of the additional disclosures regarding troubled debt restructurings as required by ASU No. 2010-20. The provisions of ASU No. 2011-02 are effective for the Company’s reporting period ending September 30, 2011. The adoption of ASU No. 2011-02 is not expected to have a material impact on the Company’s statements of income and condition.

NOTE 3 – EARNINGS PER COMMON SHARE

Basic earnings per share (“EPS”) is calculated by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted EPS is computed in a manner similar to that of basic EPS except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares (computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents (such as stock options and unvested restricted stock) were vested during the period. The weighted average common shares outstanding equals the gross number of common shares issued less unallocated shares held by the First Federal Savings Bank Employee Stock Ownership Plan (“ESOP”), nonvested restricted stock awards under the Company’s 2007 Deferred Compensation Plan and nonvested restricted stock awards under the Company’s 2008 Equity Incentive Plan. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares to be issued include any restricted shares authorized under the Company’s 2007 Deferred Compensation Plan and the 2008 Equity Incentive Plan. Unallocated common shares held by the ESOP are shown as a reduction in stockholders’ equity and are included in the weighted-average number of common shares outstanding for diluted EPS calculations as they are committed to be released.

Basic and diluted earnings per share are computed as follows:

(Dollars in thousands, except share and per share amounts)	Three Months Ended March 31,
	2011		2010

Net income	$	358	$	327


Weighted-average shares - Basic EPS		4,107,813		4,507,228
Weighted-average restricted shares -
2007 Deferred Compensation Plan		12,007		1,090
2008 Equity Incentive Plan		43,327		-
Weighted-average shares -
ESOP committed to be released - diluted EPS		97,576		27,087
Weighted-average shares - Diluted EPS		4,260,723		4,535,405
Basic earnings per common share	$	0.09	$	0.07
Diluted earnings per common share	$	0.08	$	0.07

NOTE 4 –LOANS AND ALLOWANCE FOR CREDIT LOSSES

Loans

The Company’s primary lending activity is the origination of loans secured by real estate. The Company originates one-to-four family mortgage loans, multi-family loans, nonresidential real estate loans, commercial business loans and construction loans. To a lesser extent, we also originate land loans and consumer loans.

The following table summarizes the composition of our total net loans receivable at March 31, 2011 and December 31, 2010:


	March 31, 2011						December 31, 2010
	Amount			Percent			Amount			Percent
	(Dollars in thousands)
Real estate loans:
Permanent loans:
One-to-four family	$	44,248			18.2	%	$	43,695			18.1	%
Multi-family		12,275			5.1			13,592			5.6
Nonresidential		82,082			33.8			77,089			31.9
Construction loans:
One-to-four family		21,494			8.8			20,373			8.4
Multi-family		639			0.3			357			0.1
Nonresidential		7,278			3.0			5,929			2.5
Land loans		25,998			10.7			26,394			10.9
Total real estate loans		194,014			79.9			187,429			77.5

Consumer:
Home equity loans and lines of credit		18,948			7.8			18,761			7.7
Auto loans		585			0.2			639			0.3
Deposit loans		406			0.2			377			0.2
Overdrafts		31			-			47			-
Other		2,110			0.9			2,193			0.9
Total consumer loans		22,080			9.1			22,017			9.1

Commercial loans		26,810			11.0			32,460			13.4

Total loans		242,904			100.0	%		241,906			100.0	%
Allowance for loan losses		(3,911	)					(3,649	)
Net deferred loan costs		95						89
Loans receivable, net	$	239,088					$	238,346

The following table sets forth certain information at March 31, 2011 and December 31, 2010 regarding the dollar amount of loan principal repayments becoming due during the periods indicated. The table does not include any estimate of prepayments which may significantly shorten the average life of loans and may cause our actual repayment experience to differ from that shown below. Demand loans having no stated schedule of repayments and no state maturity are reported as due in one year or less.

	.	At March 31, 2011
				Multi-family and
		One- to				Nonresidential										Total
		Four-Family				Real Estate		Construction		Land		Consumer		Commercial		Loans
		(Dollars in thousands)

Amounts due in:
One year or less		$	9,721			$	11,749	$	29,173	$	13,838	$	13,595	$	13,351	$	91,427
More than one year to three years			16,396				47,934		238		7,854		1,501		6,938		80,861
More than three years to five years			4,322				30,809		-		3,711		1,267		2,943		43,052
More than five years to fifteen years			6,020				3,865		-		595		5,717		3,578		19,775
More than fifteen years			7,789				-		-		-		-		-		7,789
Total		$	44,248			$	94,357	$	29,411	$	25,998	$	22,080	$	26,810	$	242,904


		At December 31, 2010
					Multi-family and
		One- to				Nonresidential										Total
		Four-Family				Real Estate		Construction		Land		Consumer		Commercial		Loans
		(Dollars in thousands)

Amounts due in:
One year or less		$	10,016			$	9,952	$	26,373	$	12,650	$	13,344	$	13,730	$	86,065
More than one year to three years			15,737				49,584		286		9,497		1,929		10,789		87,822
More than three years to five years			3,760				27,483		-		4,030		1,333		3,678		40,284
More than five years to fifteen years			5,849				3,662		-		217		5,411		4,263		19,402
More than fifteen years			8,333				-		-		-		-		-		8,333
Total		$	43,695			$	90,681	$	26,659	$	26,394	$	22,017	$	32,460	$	241,906

The following tables set forth the dollar amount of all loans at March 31, 2011 that are due after March 31, 2012, and at December 31, 2010 that are due after December 31, 2011, and have either fixed interest rates or floating or adjustable interest rates.

As of March 31, 2011			Floating or
	Fixed Rates		Adjustable Rates		Total
	(Dollars in thousands)
One-to-four family	$	33,163	$	1,364	$	34,527
Multi-family and nonresidential		74,155		8,453		82,608
Construction		-		238		238
Land		2,566		9,594		12,160
Consumer		3,910		4,575		8,485
Commercial		11,093		2,366		13,459
Total	$	124,887	$	26,590	$	151,477


As of December 31, 2010			Floating or
	Fixed Rates		Adjustable Rates		Total
	(Dollars in thousands)
One-to-four family	$	32,364	$	1,315	$	33,679
Multi-family and nonresidential		69,632		11,097		80,729
Construction		-		286		286
Land		2,112		11,632		13,744
Consumer		4,053		4,620		8,673
Commercial		12,079		6,651		18,730
Total	$	120,240	$	35,601	$	155,841

Our adjustable-rate mortgage loans do not adjust downward below the initial discounted contract rate. When market rates rise, as has occurred in recent periods, the interest rates on these loans may increase based on the contract rate (the index plus the margin) exceeding the initial interest rate floor.

Nonperforming Assets

We consider repossessed assets and loans that are 90 days or more past due to be nonperforming assets. Loans are placed on non-accrual status when, in management’s opinion, the borrower is unable to meet payment obligations, which typically occurs when principal and interest payments are 90 days delinquent at which time the accrual of interest ceases and the allowance for any uncollectible accrued interest is established and charged against operations. Typically, payments received on a non-accrual loan are first applied to the outstanding principal balance. At March 31, 2011 and December 31, 2010, non-accruing loans were $3.5 million and $3.0 million, respectively. Had non-accrual loans performed in accordance with their original contract terms, the Company would have recognized additional interest income, net of tax, of approximately $83,000 for the first three months of 2011 and $57,000 for the year ended December 31, 2010. No interest income was recognized on non-accrual loans on a cash basis during the first quarter of 2011 or during 2010.

Other real estate owned and repossessed assets which are acquired through, or in lieu, of foreclosure is held for sale and is initially recorded at fair value, less estimated selling cost when acquired, establishing a new cost basis. Costs after acquisition are generally expensed. Any changes in fair value of the asset are recorded through expense. The valuation of other real estate owned and repossessed assets is subjective in nature and may be adjusted in the future because of changes in economic conditions.

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

Nonperforming Assets	At March 31,			At December 31,
	2011			2010
	(Dollars in thousands)

Non-accrual loans:
One- to four-family	$	1,415		$	1,266
Multi-family and nonresidential		315			541
Construction		-			-
Land		583			541
Consumer		228			240
Commercial		922			397
Total		3,463			2,985

Accruing loans past due 90 days or more:
One- to four-family		-			-
Multi-family and nonresidential		-			-
Construction		-			-
Land		-			-
Consumer		-			-
Commercial		-			-
Total		-			-
Total of non-accrual and 90 days or		3,463			2,985
more past due loans

Real estate owned		115			115
Other nonperforming assets		-			16
Total nonperforming assets	$	3,578		$	3,116

Total nonperforming loans to total loans		1.43	%		1.23	%
Total nonperforming loans to total assets		1.01	%		0.86	%
Total nonperforming assets to total assets		1.05	%		0.90	%

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance for probable credit losses in the loan portfolio and represents management’s best estimate of known and inherent losses in the loan portfolio, based upon management’s evaluation of the portfolio’s collectability. 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. The recommendations for increases or decreases to the allowance are approved by the Asset Quality Review Committee and presented to the Board of Directors.

Our methodology for assessing the appropriateness of the allowance for loan losses consists of: (1) a specific allowance on identified problem loans; and (2) a general valuation allowance on the remainder of the loan portfolio. Management estimates a range of losses and then makes its best estimate of potential credit losses within that range. Although we determine the amount of each element of the allowance separately, the entire allowance for loan losses is available for the entire portfolio.

Specific Allowance Required for Identified Problem Loans. We establish an allowance on certain identified problem loans based on such factors as: (1) the strength of the customer’s personal or business cash flows; (2) the availability of other sources of repayment; (3) the amount due or past due; (4) the type and value of collateral; (5) the strength of our collateral position; and (6) the borrower’s effort to cure the delinquency.

General Valuation Allowance on the Remainder of the Loan Portfolio. We establish a general allowance for loans that are not currently classified in order to recognize the inherent losses associated with lending activities. This general valuation allowance is determined through two steps. First, we estimate potential losses on the portfolio by analyzing historical losses for each loan category. Second, we look at additional significant factors that, in management’s judgment, affect the collectability of the portfolio as of the evaluation date. These significant factors may include changes in lending policies and procedures; international, national, regional and local economic conditions; changes in the nature and volume of the portfolio; changes in the experience, ability and depth of lending management; changes in the volume of past dues, non-accruals and classified assets; changes in the quality of the loan review system; changes in the value of underlying collateral for collateral dependent loans; concentrations of credit, and other factors.

We also identify loans that may need to be charged-off as a loss by reviewing all delinquent loans, classified loans and other loans for which management may have concerns about collectability. For individually reviewed loans, the borrower’s inability to make payments under the terms of the loan or a shortfall in collateral value would result in our allocating a portion of the allowance to the loan that was impaired.

At March 31, 2011, our allowance for loan losses represented 1.6% of total gross loans and 112.9% of nonperforming loans. At December 31, 2010, our allowance for loan losses represented 1.5% of total gross loans and 122.2% of nonperforming loans. The allowance for loan losses increased $262,000 to $3.9 million at March 31, 2011 from $3.6 million at December 31, 2010 primarily due to increases in nonperforming and classified loans.

The following table sets forth the breakdown of the allowance for loan losses by loan category at the dates indicated.

	At March 31,								At December 31,
	2011								2010
						% of								% of
			% of			Loans in					% of			Loans in
			Allowance			Category					Allowance			Category
			to Total			to Total					to Total			to Total
	Amount		Allowance			Loans			Amount		Allowance			Loans
	(Dollars in thousands)								(Dollars in thousands)
One-to-four family	$	566		14.5	%		18.2	%	$	545		14.9	%		18.1	%
Multi-family and nonresidential		990		25.3			38.9			1,061		29.1			37.5
Construction		325		8.3			12.1			325		8.9			11.0
Land		681		17.4			10.7			730		20.0			10.9
Consumer		250		6.4			9.1			250		6.9			9.1
Commercial		1,099		28.1			11.0			738		20.2			13.4
Total allowance for loan losses	$	3,911		100.0	%		100.0	%	$	3,649		100.0	%		100.0	%

Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and our results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Furthermore, while we believe we have established our allowance for loan losses in conformity with accepted accounting principles, there can be no assurance that the Office of Thrift Supervision, in reviewing our loan portfolio, will not require us to increase our allowance for loan losses. The Office of Thrift Supervision may require us to increase our allowance for loan losses based on judgments different from ours. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses is adequate or that increases will not be necessary should the quality of any loans deteriorate as a result of the factors discussed above. Any material increase in the allowance for loan losses may adversely affect our financial condition and results of operations.

Analysis of Loan Loss Experience

The following table details allowance for loan losses and recorded investment in loans by portfolio segment for the years ended March 31, 2011 and 2010:

Allowance for Loan Losses and Recorded Investment in Loans
For the Year Ended March 31, 2011
(Dollars in thousands)
	One-to-Four		Multi-family/								Consumer
	Family		Nonresidential			Construction		Land			and Other			Commercial		Unallocated		Total

Allowance for loan losses:

Beginning balance	$	545	$	1,061		$	325	$	730		$	250		$	738	$	-	$	3,649
Charge offs		-		-			-		-			(5	)		-		-		(5	)
Recoveries		-		-			-		-			3			9		-		12
Provision (Credit)		21		(71	)		-		(49	)		2			352		-		255
Ending balance	$	566	$	990		$	325	$	681		$	250		$	1,099	$	-	$	3,911

Ending balance individually evaluated for impairment	$	216	$	-		$	-	$	71		$	-		$	238	$	-	$	525

Ending balance collectively evaluated for impairment	$	350	$	990		$	325	$	610		$	250		$	861	$	-	$	3,386

Loans:

Ending balance	$	44,248	$	94,357		$	29,411	$	25,998		$	22,080		$	26,810	$	-	$	242,904

Ending balance individually evaluated for impairment	$	501	$	249		$	-	$	292		$	160		$	748	$	-	$	1,950

Ending balance collectively evaluated for impairment	$	43,747	$	94,108		$	29,411	$	25,706		$	21,920		$	26,062	$	-	$	240,954

Allowance for Loan Losses and Recorded Investment in Loans
For the Year Ended March 31, 2010
(Dollars in thousands)
	One-to-Four			Multi-family/							Consumer
	Family			Nonresidential			Construction		Land		and Other			Commercial		Unallocated		Total

Allowance for loan losses:

Beginning balance	$	280		$	1,125		$	160	$	286	$	200		$	762	$	-	$	2,813
Charge offs		(240	)		-			-		-		(4	)		-		-		(244	)
Recoveries		3			-			-		-		2			9		-		14
Provision (Credit)		237			(45	)		-		9		2			17		-		220
Ending balance	$	280		$	1,080		$	160	$	295	$	200		$	788	$	-	$	2,803

Ending balance individually evaluated for impairment	$	-		$	48		$	-	$	-	$	-		$	-	$	-	$	48

Ending balance collectively evaluated for impairment	$	280		$	1,032		$	160	$	295	$	200		$	788	$	-	$	2,755

Loans:

Ending balance	$	44,106		$	93,208		$	26,953	$	21,355	$	20,606		$	23,854	$	-	$	230,082

Ending balance individually evaluated for impairment	$	-		$	188		$	-	$	-	$	-		$	-	$	-	$	188

Ending balance collectively evaluated for impairment	$	44,106		$	93,020		$	26,953	$	21,355	$	20,606		$	23,854	$	-	$	229,894

The following table shows credit quality indicators at March 31, 2011 and December 31, 2010:

Credit Quality Indicators as of March 31, 2011
(Dollars in thousands)

	One-to-Four		Multi-family/						Consumer
	Family		Nonresidential		Construction		Land		and Other		Commercial		Total

Corporate Credit Exposures
Credit Risk Profile by Internally Assigned Grade

Grade:
Pass	$	41,441	$	91,935	$	27,859	$	25,220	$	21,702	$	25,537	$	233,694
Special mention		851		1,966		1,189		191		58		88		4,343
Substandard		1,956		456		363		587		320		973		4,655
Doubtful		-		-		-		-		-		212		212
Total	$	44,248	$	94,357	$	29,411	$	25,998	$	22,080	$	26,810	$	242,904

Credit Quality Indicators as of December 31, 2010
(Dollars in thousands)

	One-to-Four		Multi-family/						Consumer
	Family		Nonresidential		Construction		Land		and Other		Commercial		Total


Corporate Credit Exposures
Credit Risk Profile by Internally Assigned Grade

Grade:
Pass	$	41,389	$	87,570	$	25,413	$	25,864	$	21,637	$	31,703	$	233,576
Special mention		794		1,904		720		192		70		103		3,783
Substandard		1,512		1,207		526		338		310		442		4,335
Doubtful		-		-		-		-		-		212		212
Total	$	43,695	$	90,681	$	26,659	$	26,394	$	22,017	$	32,460	$	241,906

Credit risk by internally assigned grade

Loans assigned a grade of “Pass” range from loans with virtually no risk of default to loans including some or all of the following characteristics: borrower generally generates sufficient but strained cash flows to fund debt service, key ratios are generally slightly worse than peers, earnings may be trending downward, borrower is currently performing as agreed, risk of default is higher than normal but with prospects for improved financial performance, some borrower management team weaknesses may be evident, loans are protected by collateral that can be liquidated, industry outlook may be trending down but is generally acceptable.

Loans assigned a grade of “Special mention” characteristics include, but are not limited to, the following: weakened due to negative trends in the balance sheet and income statement, current cash flow may be insufficient to meet debt service, existence of documentation deficiencies, potential risk of payment default, collateral coverage is minimal, financial information may be inadequate to show the recent condition of the borrower, management of the borrower may not be adequately qualified or have limited experience, turnover in key positions and industry outlook is generally negative with reasonable expectations of a turnaround within 12 to 18 months.

Loans assigned a grade of “Substandard” characteristics include, but are not limited to, the following: payment default and /or loss is possible but not yet probable, cash flow is insufficient to service debt, there is a likelihood that the collateral will have to be liquidated and/or the guarantor will be called upon to repay the debt, collateral coverage is marginal or nonexistent, guarantor has limited outside worth and is highly leveraged, management of the borrower has no prior experience with similar activities, capital base is weak and insufficient to absorb continuing losses and industry outlook is generally negative with reasonable expectations of a turnaround within 18 to 24 months.

Loans assigned a grade of “Doubtful” include all of the characteristics of “Substandard”, but available information suggests it is unlikely that the loan will be paid back in its entirety. Cash flows are insufficient to service the debt, the borrower has had a series of substantial losses, key ratios are at unacceptable levels, and industry outlook is negative with an undeterminable recovery time. If the current adverse trends continue, it is unlikely the borrower will have the ability to meet the terms of the loan agreement. The probability of incurring a loss is greater than 50%. All loans classified as doubtful are placed on nonaccrual status.

These internally assigned grades are updated on a continual basis throughout the course of the year and represent management’s most updated judgment regarding grades at March 31, 2011.

Credit risk by payment activity

Loans that do not receive an internally assigned grade are separated into two categories: performing and nonperforming. Performing loans are generally abiding by the terms of their loan contract and are less than 90 days past due. Loans are deemed nonperforming typically when they reach nonaccrual status or are 90 days past due or greater. The information presented by payment activity is updated as of March 31, 2011 based upon past due status as of that date.

The following table shows an aging analysis of past due loans as of the periods indicated:

Age Analysis of Past Due Loans
As of March 31, 2011
(Dollars in thousands)
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans		Loans >90 Days and Accruing
One-to-four family	$	1,404	$	-	$	138	$	1,542	$	42,706	$	44,248	$	-
Multifamily/nonresidential		239		-		315		554		93,803		94,357		-
Construction		-		-		-		-		29,411		29,411		-
Land		-		-		541		541		25,457		25,998		-
Consumer and other		162		46		695		903		21,177		22,080		-
Commercial		221		-		879		1,100		25,710		26,810		-

Age Analysis of Past Due Loans
As of December 31, 2010
(Dollars in thousands)
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans		Loans >90 Days and Accruing
One-to-four family	$	675	$	168	$	693	$	1,536	$	42,159	$	43,695	$	-
Multifamily/nonresidential		-		-		-		-		90,681		90,681		-
Construction		-		-		-		-		26,659		26,659		-
Land		-		-		541		541		25,853		26,394		-
Consumer and other		661		137		436		1,234		20,783		22,017		-
Commercial		-		-		-		-		32,460		32,460		-

The following tables set forth details regarding impaired loans as of the periods indicated:

Impaired Loans
For the Three Months Ended March 31, 2011
(Dollars in thousands)
	Recorded Investment		Unpaid Principal Blance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
One-to-four family	$	-	$	-	$	-	$	-	$	-
Multifamily/nonresidential		249		249		-		249		-
Construction		-		-		-		-		-
Land		-		-		-		-		-
Consumer and other		160		160		-		160		-
Commercial		212		212		-		212		-
Subtotal		621		621		-		621		-

With an allowance recorded:
One-to-four family		501		501		216		501		-
Multifamily/nonresidential		-		-		-		-		-
Construction		-		-		-		-		-
Land		292		292		71		292		-
Consumer and other		-		-		-		-		-
Commercial		536		536		238		536		-
Subtotal		1,329		1,329		525		1,329		-

Total:
One-to-four family		501		501		216		501		-
Multifamily/nonresidential		249		249		-		249		-
Construction		-		-		-		-		-
Land		292		292		71		292		-
Consumer and other		160		160		-		160		-
Commercial		748		748		238		748		-
Total	$	1,950	$	1,950	$	525	$	1,950	$	-

Impaired Loans
For the Twelve Months Ended December 31, 2010
(Dollars in thousands)
	Recorded Investment		Unpaid Principal Blance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
One-to-four family	$	-	$	-	$	-	$	-	$	-
Multifamily/nonresidential		249		249		-		252		5
Construction		-		-		-		-		-
Land		-		-		-		-		-
Consumer and other		160		160		-		160		6
Commercial		212		270		-		251		5
Subtotal		621		679		-		663		16

With an allowance recorded:
One-to-four family		461		461		195		465		23
Multifamily/nonresidential		-		-		-		-		-
Construction		-		-		-		-		-
Land		292		292		71		292		5
Consumer and other		-		-		-		-		-
Commercial		-		-		-		-		-
Subtotal		753		753		266		757		28

Total:
One-to-four family		461		461		195		465		23
Multifamily/nonresidential		249		249		-		252		5
Construction		-		-		-		-		-
Land		292		292		71		292		5
Consumer and other		160		160		-		160		6
Commercial		212		270		-		251		5
Total	$	1,374	$	1,432	$	266	$	1,420	$	44

No interest was recognized on impaired loans on a cash basis during the three month period ended March 31, 2011 or the twelve month period ended December 31, 2010.

Troubled Debt Restructurings

The following table sets forth information about modifications which were considered Troubled Debt Restructurings as of March 31, 2011. There were no troubled debt restructurings as of March 31, 2010.

Modifications

As of March 31, 2011

(Dollars in thousands)

Number of

Contracts

Pre-Modification

Outstanding

Recorded

Investment

Post-Modification

Outstanding

Recorded

Investment

Troubled debt restructurings

Commercial

178

Troubled Debt Restructurings That Subsequently Defaulted

Number of

Contracts

Pre-Modification

Outstanding

Recorded

Investment

Troubled debt restructurings

Commercial

Loans characterized as Troubled Debt Restructurings (“TDRs”) totaled $178 at March 31, 2011, compared to $0 at March 31, 2010. For these loans, the Company measures the level of impairment based on the present value of the estimated projected cash flows, the estimated value of the collateral or, if available, observable market prices. If current valuations are lower than the current book balance of the credit, the negative differences are reviewed and, if deemed appropriate, charged-off. If a charge-off is not deemed appropriate, a specific reserve is established for the individual loan in question. The allowance allocated to TDRs, excluding specifically-impaired loans referred to above, totaled $0 at March 31, 2011 and 2010. The TDR total of $178 at March 31, 2011 is comprised of a single commercial real estate loan for which the Company agreed to accept interest only payments for one year. The difference in net present values of the cash flows for the restructured loan compared to the original loan terms was immaterial and, therefore, no specific reserve was established for the loan.

Residential Mortgage Loan Foreclosure

The Company evaluates its residential mortgage loan foreclosure processes and documentation procedures prior to any formal action being taken against the subject properties. The Company processes a relatively low volume of residential mortgage foreclosures and many of the relevant processes are manual in nature. The Company believes that its procedures for reviewing and validating the information in its documentation pertaining to residential mortgage loan foreclosures are sound.

NOTE 5 – INVESTMENT SECURITIES

For securities available-for-sale, the following table shows the amortized cost, unrealized gains and losses (pre-tax) included in accumulated other comprehensive income, and estimated fair value by security type as of the dates indicated.


March 31, 2011
(Dollars in thousands)
			Gross		Gross			Approximate
	Amortized		Unrealized		Unrealized			Fair
Available-for-sale	Cost		Gains		Losses			Value
U. S. Treasury	$	4,721	$	1,271	$	-		$	5,992
U. S. Government agencies and corporations		7,999		21		(133	)		7,887
Mortgage-backed securities		39,339		2,449		-			41,788
Collateralized mortgage obligations		3,687		82		-			3,769
State and political subdivisions		8,966		243		(1	)		9,208
Corporate debt securities		15		345		-			360
Total	$	64,727	$	4,411	$	(134	)	$	69,004

December 31, 2010
(Dollars in thousands)
			Gross		Gross			Approximate
	Amortized		Unrealized		Unrealized			Fair
Available-for-sale	Cost		Gains		Losses			Value
U. S. Treasury	$	4,730	$	1,363	$	-		$	6,093
U. S. Government agencies and corporations		7,999		38		(119	)		7,918
Mortgage-backed securities		43,748		2,603		(2	)		46,349
Collateralized mortgage obligations		3,993		87		-			4,080
State and political subdivisions		9,555		180		(18	)		9,717
Corporate debt securities		18		39		-			57
Total	$	70,043	$	4,310	$	(139	)	$	74,214

Contractual maturities of debt securities at March 31, 2011 were as follows. Securities not due at a single maturity or with no maturity date, primarily mortgage-backed securities and collateralized mortgage obligations, are shown separately.

	March 31, 2011
	Amortized		Fair
	Cost		Value
	(Dollars in thousands)
Within one year	$	-	$	-
One to five years		5,020		6,306
Five to 10 years		5,309		5,475
After 10 years		11,372		11,666
		21,701		23,447
Mortgage-backed securities		43,026		45,557
Total	$	64,727	$	69,004

The following tables show the fair value and gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous loss position, as of the dates indicated.

	March 31, 2011
	(Dollars in thousands)
	Less Than 12 months					12 months or more				Total
	Approximate		Gross			Approximate		Gross		Approximate		Gross
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
Available-for-sale	Value		Losses			Value		Losses		Value		Losses
U. S. Government agencies and corporations	$	6,867	$	(133	)	$	-	$	-	$	6,867	$	(133	)
Mortgage-backed securities		-		-			-		-		-		-
Collateralized mortgage obligations		-		-			-		-		-		-
State and political subdivisions		400		(1	)		-		-		400		(1	)
Trust preferred securities		-		-			-		-		-		-
Total	$	7,267	$	(134	)	$	-	$	-	$	7,267	$	(134	)


	December 31, 2010
	(Dollars in thousands)
	Less Than 12 months					12 months or more				Total
	Approximate		Gross			Approximate		Gross		Approximate		Gross
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
Available-for-sale	Value		Losses			Value		Losses		Value		Losses
U. S. Government agencies and corporations	$	6,881	$	(119	)	$	-	$	-	$	6,881	$	(119	)
Mortgage-backed securities		3,598		(2	)		-		-		3,598		(2	)
Collateralized mortgage obligations		-		-			-		-		-		-
State and political subdivisions		1,252		(18	)		-		-		1,252		(18	)
Trust preferred securities		-		-			-		-		-		-
Total	$	11,731	$	(139	)	$	-	$	-	$	11,731	$	(139	)

Declines in fair value of available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than amortized cost, (ii) the financial condition and near-term prospects of the issuer, (iii) whether the market decline was affected by macroeconomic conditions, and (iv) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary impairment decline exists involves a high degree of subjectivity and is based on information available to management at a point in time.

NOTE 6 –FAIR VALUE

FASB’s ASC Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. In general, fair values of financial instruments are based upon quoted market prices, where available. If such quoted market prices are not available, fair value is primarily determined by matrix pricing, and in some cases, fair value is determined by an independent third party. Valuation adjustments may be made to ensure that financial statements are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The fair value hierarchy gives the highest priority to a valuation based on quoted prices in active markets for identical assets and liabilities (Level 1), moderate priority to a valuation based on quoted prices in active markets for similar assets and liabilities and/or based on assumptions that are observable in the market (Level 2), and the lowest priority to a valuation based on assumptions that are not observable in the market (Level 3). The following methods and assumptions are used by the Company to estimate the fair values of the Company’s financial assets and liabilities on a recurring basis:

Available-for-Sale Securities

The fair values of securities available for sale are determined by a matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. Level 2 securities include U. S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions, asset-backed and other securities. Level 3 securities include preferred term securities that are not traded in an active market with a fair value determined by an independent third party.

Fair Value of Assets Measured on a Recurring Basis

Assets measured at fair value on a recurring basis are summarized below:


March 31, 2011	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in thousands)
Assets:
Available for sale securities
U. S. Treasury	$	5,992	$	5,992	$	-	$	-
U. S. Government		7,887				7,887
Mortgage-backed securities		41,788				41,788
Collateralized mortgage obligations		3,769				3,769
State and political subdivisions		9,208				9,208
Corporate debt securities		360						360

Activity in assets measured using Level 3 inputs during the year was as follows:
Balance, January 1, 2011	$	57
Paydowns		(2	)
Unrealized gains included in other comprehensive income		305
Balance, March 31, 2011	$	360


December 31, 2010	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in thousands)
Assets:
Available for sale securities:
U.S. Treasury	$	6,093	$	6,093	$	-	$	-
U.S. Government agencies		7,918		-		7,918		-
Mortgage-backed securities		46,349		-		46,349		-
Collateralized mortgage obligations		4,080		-		4,080		-
State and political subdivisions		9,717		-		9,717		-
Corporate debt securities		57		-		-		57

Activity in assets measured using Level 3 inputs during the year was as follows:
Balance, January 1, 2010	$	30
Paydowns		(12	)
Unrealized gains included in other comprehensive income		39
Balance, December 31, 2010	$	57

Fair Value of Assets Measured on a Nonrecurring Basis

Certain assets may be recorded at fair value on a nonrecurring basis. These nonrecurring fair value adjustments typically result from the application of lower of cost or market accounting or a write-down occurring during the period. The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value of the related individual assets as of March 31, 2011 and December 31, 2010.

March 31, 2011	Level 1		Level 2		Level 3		Nonrecurring Fair Value Adjustments Three Months Ended March 31, 2011
(Dollars in thousands)
Impaired loans		--		--	$	600	$	(295	)

December 31, 2010	Level 1		Level 2		Level 3		Nonrecurring Fair Value Adjustments Twelve Months Ended December 31, 2010
(Dollars in thousands)
Impaired loans		--		--	$	1,432	$	(58	)
Other real estate owned		--		--		115		( 38	)

The following methods and assumptions are used by the Company to estimate the fair values of the Company’s financial assets and liabilities on a nonrecurring basis:

Mortgage Loans Held For Sale

Mortgage loans held for sale are carried at the lower of cost or fair value. They consist of residential mortgage loans held for sale that are valued based on traded market value of similar assets where available and/or discounted cash flows at market interest rates. They are recorded at cost in the consolidated balance sheets at March 31, 2011 and December 31, 2010.

Other Real Estate Owned and Repossessed Assets

Other real estate owned and repossessed assets are carried at lower of cost or estimated fair value. The estimated fair value of the real estate or repossessed asset is determined through current appraisals, or management’s best estimate of the value and adjusted as necessary, by management, to reflect current market conditions. As such, other real estate owned and repossessed assets are generally classified as Level 3.

Impaired Loans

While the overall loan portfolio is not carried at fair value, the Company periodically records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral dependent loans when establishing the allowance for loan losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan. In determining the value of real estate collateral, the Company relies on external appraisals and assessment of property values by its internal staff. In the case of non-real estate collateral, reliance is placed on a variety of sources, including external estimates of value and judgments based on the experience and expertise of internal specialists. Because many of these inputs are not observable, the measurements are classified as Level 3.

The “Fair Value Measurement and Disclosures” topic of the FASB ASC requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The estimated fair value approximates carrying value for cash and cash equivalents and the cash surrender value of life insurance policies. The methodologies for other financial assets and financial liabilities are discussed below.

The year-end estimated fair values of financial instruments were as follows for the dates indicated:


	At March 31, 2011				At December 31, 2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

	(Dollars in thousands)
Financial assets
Cash and cash equivalents	$	11,720	$	11,720	$	7,788	$	7,788
Other investments		1,992		1,992		3,486		3,485
Available-for-sale securities		69,004		69,004		74,214		74,214
Loans held for sale		1,239		1,239		3,155		3,155
Loans, net of allowance for loan losses		239,088		238,474		238,346		237,770
FHLB stock		2,988		2,988		2,988		2,988
Forward sale commitments		50		50		21		21

Financial liabilities
Deposits	$	218,999	$	219,227	$	219,504	$	219,808
Securities sold under agreement to repurchase		5,425		5,425		6,215		6,215
FHLB advances		13,000		13,681		13,000		13,790
Other borrowings		35,000		37,384		35,000		37,455
Interest rate lock commitments		50		50		21		21

General

For short-term financial instruments realizable in three months or less, the carrying amount approximates fair value.

Cash and Cash Equivalents and Interest Receivable

The carrying amount approximates fair value, primarily due to their short-term nature.

Federal Home Loan Bank Stock

The fair value of stock in the Federal Home Loan Bank equals the carrying value reported in the balance sheet. This stock is redeemable at full par value only by the Federal Home Loan Bank.

Other Investments

Other investments consist of time deposits placed with other banks and is calculated based on present value of future cash flows.

Available-for-Sale Securities

Loans

The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics were aggregated for purposes of the calculations.

Deposits

The fair values disclosed for demand deposits, both interest-bearing and noninterest-bearing, are, by definition, equal to the amount payable on demand at the reporting date. The fair values of certificates of deposit and individual retirement accounts are estimated using a discounted cash flow based on currently effective interest rates for similar types of accounts.

Securities Sold Under Agreement to Repurchase

Securities sold under agreement to repurchase are transacted with customers as a way to enhance our customers’ interest-earning ability. The Company does not consider customer repurchase agreements to be a wholesale funding source, but rather an additional treasury management service provided to our customer base. Our customer repurchase agreements are based on an overnight investment sweep that can fluctuate based on our customers’ operating account balances.

Federal Home Loan Bank Advances

Rates currently available to the Bank for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.

Other Borrowings

On April 30, 2008, the Bank entered into two balance sheet leverage transactions whereby it borrowed a total of $35 million in multiple rate repurchase agreements and invested the proceeds in U. S. Agency pass-through Mortgage Backed Securities, which were pledged as collateral. The fair values disclosed are based on third party modeling of the debt structure.

Commitments to Originate Loans, Forward Sale Commitments, Letters of Credit and Lines of Credit

The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of forward sale commitments is estimated based on current market prices for loans of similar terms and credit quality. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.

NOTE 7 –TRANSFERS OF FINANCIAL ASSETS

Under the provisions of the FASB Accounting Standards Update 2009-16, “Accounting for Transfers of Financial Assets” (ASU 2009-16) and the amendments to ASC 860, “Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” which modify the criteria for achieving sale accounting for transfers of financial assets and define the term participating interest to establish specific conditions for reporting a transfer of a portion of a financial asset as a sale. Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. A participating interest is a portion of an entire financial asset that (1) conveys proportionate ownership rights with equal priority to each participating interest holder (2) involves no recourse (other than standard representations and warranties) to, or subordination by, any participating interest holder, and (3) does not entitle any participating interest holder to receive cash before any other participating interest holder. The Company’s transfers of financial assets consist solely of one loan participation.

As of March 31, 2011, the Company had one participation loan which was a commercial line of credit that did not qualify as a sale under the provisions of ASU 2009-16 and, therefore, approximately $510,000 was recorded on the balance sheet as a participation loan and a corresponding amount was recorded in other liabilities as a secured borrowing. The principal amount outstanding on this participation loan varies from day-to-day in relation to the borrowing needs of the customer; the maximum participation amount outstanding at any time will not exceed $5.0 million under the terms of the participation agreements.

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

Management’s discussion and analysis of the Company’s financial condition and results of operations is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited condensed consolidated financial statements and footnotes appearing in Part I, Item 1 of this report and the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC on March 7, 2011.

Forward-Looking Statements.

This quarterly report contains forward-looking statements that are based on assumptions and may describe future plans, strategies, and expectations of First Advantage Bancorp. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiary include, but are not limited to, changes in interest rates, national and regional economic conditions, legislative and regulatory changes, monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in First Federal Savings Bank’s market area, changes in real estate market values in First Federal Savings Bank’s market area, changes in relevant accounting principles and guidelines and the inability of third party service providers to perform.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, the Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

General.

The Bank provides commercial and retail banking services, including commercial loans, commercial real estate loans, one-to-four family residential mortgage loans, home equity loans and lines of credit and consumer loans as well as certificates of deposit, checking accounts, money-market accounts and savings accounts within its market area. At March 31, 2011, the Company had total assets of $341.7 million, deposits of $219.0 million and shareholders’ equity of $67.2 million. Unless otherwise indicated, all references to the Company refer collectively to the Company and the Bank.

Application of Critical Accounting Policies.

The discussion and analysis of the Company’s financial condition and results of operation is based upon the Company’s unaudited condensed consolidated financial statements, which have been prepared in conformity with GAAP for interim financial information and with the instructions for Form 10-Q. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company considers the allowance for loan losses and other-than-temporary impairment of securities to be its only critical accounting policies.

Allowance for Loan Losses. The Company maintains the allowance for loan losses at a level that it considers to be adequate to provide for credit losses inherent in its loan portfolio. Management determines the level of the allowance by performing a quarterly analysis that considers concentrations of credit, past loss experience, current economic conditions, the amount and composition of the loan portfolio (including nonperforming and potential problem loans), the estimated fair value of underlying collateral, and other information relevant to assessing the risk of loss inherent in the loan portfolio. As a result of management’s analysis, a range of potential amounts of the allowance for loan losses is determined.

Currently, management closely monitors the impact of troop deployments at Fort Campbell Military Base, a local U. S. Army installation that plays a significant role in the economy of the Bank’s primary market area. Additionally, given the Bank’s concentration in real estate secured loans, management is continuing to closely monitor trends in the local real estate market to assess any related impact on the loan portfolio and potential delinquencies or credit losses.

The Company continually monitors the adequacy of the allowance for loan losses and makes additions to the allowance in accordance with the analysis described above. Because of uncertainties inherent in estimating the appropriate level of the allowance for loan losses, actual results may differ from management’s estimate of credit losses and the related allowance.

Other-than-temporary Impairment of Securities. Investments that we currently own could suffer declines in fair value that are other-than-temporary. We monitor our portfolio continuously and actively manage our investments to preserve values whenever possible. When, in the opinion of management, a decline in the fair value of an investment is considered to be other-than-temporary, such investment is written-down to its fair value. The amount written-down is recorded in earnings as an other-than-temporary impairment on investments. We did not record any other-than-temporary impairment of securities during the first three months of 2011.

Comparison of Financial Condition at March 31, 2011 and December 31, 2010

Total Assets. At March 31, 2011, total assets were $341.7 million, a decrease of $3.6 million, or 1.0%, compared to $345.3 million at December 31, 2010.

Cash and Cash Equivalents. Cash and cash equivalents were $11.7 million at March 31, 2011 compared to $7.8 million at December 31, 2010.

Investments. Our investment securities portfolio consists primarily of U.S. government and callable federal agency bonds and U.S. government agency mortgage-backed securities, with a relatively smaller investment in obligations of state and political subdivisions and other securities. Total securities were $69.0 million at March 31, 2011, a decrease of $5.2 million, or 7.0%, compared to $74.2 million as of December 31, 2010.

Loans. Net loans remained relatively stable at $239.1 million at March 31, 2011 compared to $238.3 million as of December 31, 2010. Our primary lending activity is the origination of loans secured by real estate, which grew to $194.0 million at March 31, 2011 compared to $187.4 million as of December 31, 2010. The Company does not originate sub-prime residential mortgage loans, nor does it hold any in its loan portfolio or hold any investment securities that are collateralized by sub-prime residential mortgage loans.

Allowance for Loan Losses. The allowance for loan losses increased by $262,000, or 7.2%, to $3.9 million at March 31, 2011 compared to $3.6 million as of December 31, 2010.

Non-performing assets (consisting of non-accrual loans and real estate owned) totaled $3.6 million at March 31, 2011 compared to $3.1 million at December 31, 2010. The Bank’s management reviews the level of the allowance for loan losses on a regular basis and establishes the provision for loan losses based upon the volume and types of lending, delinquency levels, loss experience, the amount of impaired and classified loans, economic conditions and other relevant factors related to the collectability of the loan portfolio.

Deposits. Total deposits remained relatively stable at $219.0 million at March 31, 2011 compared to $219.5 million as of December 31, 2010.

Borrowings. Total borrowings with other banks remained unchanged and totaled $35.0 million at both March 31, 2011 and at December 31, 2010. FHLB advances also remained unchanged and totaled $13.0 million at both March 31, 2011 and December 31, 2010. Securities sold under agreements to repurchase totaled $5.4 million as of March 31, 2011 compared to $6.2 million as of December 31, 2010.

Interest Payable and Other Liabilities. Total interest payable and other liabilities totaled $2.1 million at March 31, 2011 compared to $4.8 million at December 31, 2010. The decrease was primarily due to the change in the outstanding balance of one participation loan consisting of a commercial line of credit that did not qualify as a sale under the provisions of ASU 2009-16. Under the provisions of ASU 2009-16, this participation loan was recorded on the balance sheet as a participation loan and a corresponding amount recorded in other liabilities as a secured borrowing. The outstanding balance at March 31, 2011 was approximately $510,000, compared to an outstanding balance of approximately $3 million at December 31, 2010. See “Note 7 – Transfers of Financial Assets.”

Shareholders’ Equity. Total shareholders’ equity increased slightly to $67.2 million as of March 31, 2011, compared to $66.7 million as of December 31, 2010.

Comparison of Operating Results for the Three Months Ended March 31, 2011 and 2010

General. Net income for the three months ended March 31, 2011 was $358,000, an increase of 9.5% compared to net income of $327,000 for the three months ended March 31, 2010. The increase was primarily due to an increase of $305,000 in net interest income after the provision for loan losses. This positive impact to earnings was partially offset by an increase of $235,000 in non-interest expense and decrease of $25,000 in non-interest income.

Net Interest Income. The Company experienced an increase of $333,000, or 11.1% in net interest income to $3.3 million for the three months ended March 31, 2011 compared to $3.0 million for the three months ended March 31, 2010. Total interest income remained relatively unchanged at $4.4 million for the three months ended March 31, 2011 compared to the prior year period.

Interest income on loans increased 9.5% to $3.5 million during the three months ended March 31, 2011 as the average outstanding balance increased by 10.3% or $22.2 million to $239.3 million, while the yield on the portfolio remained virtually unchanged from the same period one year ago.

Interest income on investment securities decreased by $313,000, or 28.7%, to $777,000 for the three months ended March 31, 2011 from the same prior year period as average balances decreased by 23.7% or $22.3 million and average yields decreased 31 basis points. The primary reason for the decline in average balances during the period was accelerated prepayments on mortgage backed securities due to falling interest rates. Additionally, calls on higher yielding agency bonds were significant during the period, thereby contributing to the decline in average balances and the lower yield on investments.

Total interest expense decreased by $328,000 or 24.2% to $1.0 million for the three months ended March 31, 2011 as compared to the three months ended March 31, 2010. The average balance of interest-bearing deposits decreased 1.4% to $196.2 million for the quarter ended March 31, 2011 as compared to the quarter ended March 31, 2010. Interest paid on interest-bearing deposits declined by $323,000, or 35.3%, to $591,000 for the three month period ended March 31, 2011 as the average interest rate paid declined 64 basis points, primarily as a result of lower interest rates paid to customers as higher rate fixed-term deposits matured and lower rates paid on transaction accounts as market rates declined. Interest paid on FHLB advances and other borrowings, which consisted of long-term FHLB advances and securities sold under agreements to repurchase, decreased slightly by $8,000 or 6.4% while average balances on FHLB advances and other borrowings decreased to $17.9 million at March 31, 2011, compared to $19.3 million as of March 31, 2010 and the average interest rate paid increased three basis points. The average balance of long-term borrowings at other banks remained unchanged at $35.0 million for the quarter ended March 31, 2011 compared to the quarter ended March 31, 2010, as the interest rate paid on the borrowings remained unchanged.

The following table summarizes average balances and average yields and costs for the three months ended March 31, 2011 and 2010.

			Average Balance Sheet for the
			Three Months Ended March 31,
			2011			2010

			Interest			Interest
		Average	Income/	Yield/	Average	Income/	Yield/
		Balance	Expense	Rate	Balance	Expense	Rate
		(Dollars in thousands)
ASSETS:

Interest-earning assets:
	Interest-earning deposits	$ 8,513	$ 11	0.52%	$ 4,809	$ 3	0.25%
	Loans	239,298	3,527	5.98%	217,019	3,220	6.02%
	Investment securities	71,770	777	4.39%	94,112	1,090	4.70%
	Other interest-earning assets	4,731	55	4.71%	4,412	52	4.78%
	Total interest-earning assets	324,312	4,370	5.46%	320,352	4,365	5.53%

Noninterest-earning assets		15,475			22,896
Total		$ 339,787			$ 343,248


LIABILITIES AND SHAREHOLDERS' EQUITY:
	Interest-bearing deposits	196,197	591	1.22%	198,990	914	1.86%
	FHLB advances and other borrowings	17,852	117	2.66%	19,297	125	2.63%
	Long-term borrowings at other banks	35,000	321	3.72%	35,000	318	3.68%
Total Interest-Bearing Liabilities		249,049	1,029	1.68%	253,287	1,357	2.17%

	Noninterest-bearing deposits	21,674			17,105
	Other noninterest-bearing liabilities	2,061			2,458
	Shareholders' equity	67,003			70,398

Total		$ 339,787			$ 343,248


Net Interest Income			$ 3,341			$ 3,008


Net Yield on Earning Assets				4.18%			3.81%


Interest rate spread				3.79%			3.35%

Average interest-earning assets to
	average interest-bearing liabilities			130.22%			126.48%

Rate/Volume Analysis. The following table sets forth the effects of changing rates and volumes on our net interest income. The rate column shows the effects attributable to changes in rates (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. Changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionately between rate and volume.


	Three Months Ended
	March 31, 2011 Compared to March 31, 2010
	Increase (Decrease) Due To
	Volume			Rate			Net
	(Dollars in thousands)

Interest earned on:
Interest-earning assets:
Interest-earning demand deposits	$	60		$	(52	)	$	8
Loans		392			(85	)		307
Investment securities		(74	)		(239	)		(313	)
Other interest-earning assets		6			(3	)		3
Total Earning Assets		384			(379	)		5

Interest paid on:
Interest bearing deposits		884			(1,207	)		(323	)
FHLB advances and other borrowings		(14	)		6			(8	)
Long-term borrowings at other banks		(8	)		11			3
Total Interest-Bearing Liabilities		862			(1,190	)		(328	)
Change in Net Interest Income	$	(478	)	$	811		$	333

Provision for Loan Losses. The Company recorded a provision for loan losses of $255,000 for the three months ended March 31, 2011 compared to a provision of $227,000 for the three months ended March 31, 2010. The Bank’s management reviews the level of the allowance for loan losses on a regular basis and establishes the provision for loan losses based upon the volume and types of lending, delinquency levels, loss experience, the amount of impaired and classified loans, economic conditions and other relevant factors related to the collectability of the loan portfolio. The provision was higher for the first quarter of 2011 primarily due to growth in the loan portfolio and increases in the levels of nonperforming loans and classified loans.

Non-interest Income. The following table summarizes non-interest income for the three months ended March 31, 2011 and 2010 and the percentage change for each category of income.

	Three Months Ended March 31,
	2011		2010		% Change
	(Dollars in thousands)
Non-interest income
Service charges on deposit accounts and other fees		282		306		(7.84	) %
Loan servicing and other fees		17		21		(19.05	) %
Net gains on sales of mortgage loans held for sale		207		221		(6.33	) %
Net realized gain on sales of available-for-sale securities		-		7		(100.00	) %
Insurance and brokerage commissions		26		45		(42.22	) %
Other		47		4		1075.00	%
Total noninterest income	$	579	$	604		(4.14	) %

Non-interest income for the three months ended March 31, 2011 decreased to $579,000, compared to $604,000 for the three months ended March 31, 2010. The decrease in non-interest income was due primarily to a decrease of $24,000 or 7.8% in service charges on deposit accounts and other fees, a decrease of $14,000 or 6.3% in net gains on mortgage loan sales, as refinancing activity decreased during the first quarter of 2011 compared to the first quarter of 2010, and a decrease of $19,000 in income from insurance and brokerage commissions as sales volumes declined in the first quarter of 2011 compared to the first quarter of 2010. This decrease was primarily offset by a increase of $43,000 in other non-interest income which was primarily related to the realization of profit on the sale of other real estate owned.

Non-interest Expense. The following table summarizes non-interest expense for the three months ended March 31, 2011 and 2010 and the percentage change for each expense category.

	Three Months Ended March 31,
	2011		2010		% Change
	(Dollars in thousands)
Non-interest Expense
Salaries and employee benefits	$	1,732	$	1,543		12.25	%
Net occupancy expense		166		168		(1.19	) %
Equipment expense		187		176		6.25	%
Data processing fees		223		227		(1.76	) %
Professional fees		184		101		82.18	%
Marketing expense		76		65		16.92	%
Office expense		72		72		0.00	%
Loan collection and repossession expense		-		77		(100.00	) %
Other		477		453		5.30	%
Total non-interest expense	$	3,117	$	2,882		8.15	%

Total non-interest expense increased $235,000, or 8.2% to $3.1 million for the three months ended March 31, 2011 as compared to the same period in 2010. The increase in non-interest expense was primarily attributable to increased salaries and employee benefits of $189,000, mainly due to higher salaries, group insurance, and training expense, and an increase in professional fees of $83,000 which was primarily related the Bank’s decision to perform a thorough review of systems related to information technology during the first quarter of 2011. The increases in non-interest expense were somewhat offset by a decrease of $77,000 in loan collection and repossession expense for the three months ended March 31, 2011 compared to the three months ended March 31, 2010.

Income Taxes. Income tax expense for the three months ended March 31, 2011 was $190,000 compared to $176,000 for the same period in 2010. The effective income tax rate for the three months ended March 31, 2011 was 34.7% compared to 35.0% for the three months ended March 31, 2010. The higher income tax expense for the three months ended March 31, 2011 was primarily due to an increase in taxable income.

Liquidity Management. Liquidity is the ability to meet current and future financial obligations of a short-term nature. The Bank’s primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of investment securities and borrowings from the Federal Home Loan Bank of Cincinnati, Federal Reserve Bank, repurchase agreements and federal funds purchased. 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.

The Bank regularly adjusts 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.

The Bank’s most liquid assets are cash and cash equivalents and interest-bearing deposits. The levels of these assets depend on its operating, financing, lending and investing activities during any given period. At March 31, 2011, cash and cash equivalents totaled $11.7 million. Securities classified as available-for-sale, totaling $69.0 million at March 31, 2011, provide additional sources of liquidity. In addition, at March 31, 2011, the Bank’s maximum collateral borrowing capacity was approximately $43.0 million from the Federal Home Loan Bank of Cincinnati and its maximum collateral borrowing capacity through the Discount Window at the Federal Reserve Bank was $50.4 million. At March 31, 2011, the Bank had $13.0 million of Federal Home Loan Bank advances outstanding. At March 31, 2011, the Bank did not have any advances outstanding through the Discount Window.

At March 31, 2011, the Company (on an unconsolidated basis) had liquid assets of $12.7 million. These funds are available to pay dividends, repurchase stock and for other general corporate purposes.

Capital Management. The Bank is subject to various regulatory capital requirements administered by the Office of Thrift Supervision, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories and did not exceeded all of its regulatory capital requirements and was considered “well capitalized” under regulatory guidelines.

The following table includes the Bank’s capital ratios as of the dates indicated:

	March 31, 2011			December 31, 2010
Tier 1 Core Capital (to adjusted total assets)		14.24	%		13.89	%
Tangible Equity Ratio (to tangible assets)		14.24	%		13.89	%
Tier 1 Risk-Based Capital (to risk-weighted assets)		18.46	%		18.20	%
Total Risk-Based Capital (to risk-weighted assets)		19.51	%		19.24	%

Dividends. The Board of Directors of the Company declared and paid dividends per common share of $0.05 during the first quarter of 2011. The dividend payout ratio for the first three months of 2011, representing dividends per share divided by diluted earnings per share, was 62.6%. The dividend payout is continually reviewed by management and the Board of Directors.

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

For the three months ended March 31, 2011, we did not engage in any off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Effects of Inflation and Changing Prices. The unaudited condensed consolidated interim financial statements and related financial data presented in this interim report have been prepared according to GAAP, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution’s performance than do general levels of inflation. However, management is monitoring all developments in the credit and commodities markets in order to determine whether the Bank may be negatively impacted by a higher than normal increase in the inflation rate over the next several months. Interest rates do not necessarily move in the same direction or the same extent as the prices of goods and services.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We believe that, at March 31, 2011, there has not been any material change in the disclosure regarding this item as set forth in our Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC on March 7, 2011.

Item 4. Controls and Procedures.

The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’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, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with 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 the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. In addition, based on that evaluation, no change in the Company’s internal control over financial reporting occurred during the quarter ended March 31, 2011 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

At March 31, 2011, the Company was not a party to any pending legal proceedings. At March 31, 2011, First Federal Savings Bank was not a party to any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. Such routine legal proceedings, in the aggregate, are believed by management to be immaterial to the Bank’s financial condition and results of operations.

Item 1A. Risk Factors.

For information regarding the Company’s risk factors, see “Risk Factors” in (1) the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC on March 7, 2011. As of March 31, 2011, the risk factors of the Company have not changed materially from those disclosed in the Form 10-K.

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

The Company’s board of directors has authorized four stock repurchase programs. The stock repurchase programs allow the Company to proactively manage its capital position and return excess capital to shareholders. Under the first stock repurchase program, which was approved on December 17, 2008, the Company was authorized to repurchase up to 263,234 shares or 5.0%, of the Company’s issued common stock, through open market purchases or privately negotiated transactions, from time to time, depending on market conditions and other factors. The first stock repurchase program was completed during the first quarter of 2010. On March 4, 2010, a second repurchase program was approved which authorized the repurchase of up to 252,319 or 5.0% of the Company’s issued common stock, through open market purchases or privately negotiated transactions, from time to time, depending on market conditions and other factors. The second stock repurchase program was completed during the third quarter of 2010. On June 9, 2010, a third repurchase program was approved which authorized the repurchase of up to 240,524 or 5.0% of the Company’s issued common stock, through open market purchases or privately negotiated transactions, from time to time, depending on market conditions and other factors. On November 17, 2010, a fourth repurchase program was approved which authorized the repurchase of up to 231,624 or 5.0% of the Company’s issued common stock, through open market purchases or privately negotiated transactions, from time to time, depending on market conditions and other factors. There is no guarantee as to the exact number of shares to be repurchased by the Company.

The following table provides information with respect to purchases made by or on behalf of the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of the Company’s common stock during the first quarter of 2011.

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs		Maximum Number of Shares That May Yet Be Purchased Under the Programs at the End of the Period
January 1, 2011 to January 31, 2011		-	$	-		-		369,817
February 1, 2011 to February 28, 2011		-		-		-		369,817
March 1, 2011 to March 31, 2011		-		-		-		369,817
Total		-	$	-		-		369,817

Item 3. Defaults Upon Senior Securities.

None

Item 4. (Removed and Reserved).

Item 5. Other Information.

None

Item 6. Exhibits

3.1	Charter of First Advantage Bancorp (1)
3.2	Bylaws of First Advantage Bancorp (1)
4.0	Form of Stock Certificate of First Advantage Bancorp (1)
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.0	Section 1350 Certification

(1)	Incorporated herein by reference to the exhibits to the Company’s Registration Statement on Form S-1 (File 333-144454), as amended, initially filed with the Securities and Exchange Commission on July 10, 2007.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FIRST ADVANTAGE BANCORP

Dated: May 16, 2011	By: /s/ Earl O. Bradley, III
	Earl O. Bradley, III
	Chief Executive Officer



Dated: May 16, 2011	By: /s/ Patrick C. Greenwell
	Patrick C. Greenwell
	Chief Financial Officer

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