quarter1201210q.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, 2012

[ ] 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 X 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 11, 2012 was 4,326,535.

FIRST ADVANTAGE BANCORP

Table of Contents

		Page
	Part I. Financial Information

Item 1.	Condensed Consolidated Balance Sheets as of March 31, 2012 (unaudited) and December 31, 2011	1
	Unaudited - Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2012 and 2011	2
	Unaudited - Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2012 and 2011	3
	Unaudited - Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2012 and 2011	4
	Unaudited - Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36
	Part II. Other Information
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38

	SIGNATURES	39

First Advantage Bancorp
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share and per share amounts)
	March 31,			December 31,
	2012			2011
	(Unaudited)
Assets
Cash and due from banks	$	3,924		$	7,651
Interest-bearing demand deposits with banks		10,850			1,680
Federal funds sold		3,075			1,425
Cash and cash equivalents		17,849			10,756

Available-for-sale securities, at fair value		70,165			70,279
Loans held for sale		1,672			5,509
Loans, net of allowance for loan losses of $4,314 and $4,316 at March 31, 2012 and December 31, 2011, respectively		257,167			259,534
Premises and equipment, net		7,407			7,504
Other real estate owned and repossessed assets		2,087			1,923
Federal Home Loan Bank stock		2,988			2,988
Accrued interest receivable		1,382			1,571
Income taxes refundable		1,965			2,789
Deferred tax asset		2,166			1,927
Other assets		1,652			1,369
Total assets	$	366,500		$	366,149

Liabilities and Shareholders' Equity

Liabilities
Deposits
Demand	$	24,474		$	28,062
Savings, checking and money market		134,412			134,360
Time certificates		83,727			70,162
Total deposits		242,613			232,584

Short-term borrowings		7,949			14,676
Federal Home Loan Bank advances		13,000			13,000
Long-term debt		35,000			35,000
Other liablilities		1,982			4,414
Total liabilities		300,544			299,674
Commitments and contingencies		-			-

Shareholders' Equity
Preferred stock, $0.01 par value, 10,000,000 shares authorized no shares outstanding at March 31, 2012 or December 31, 2011		-			-
Common stock, $0.01 par value 50,000,000 shares authorized, 4,360,335 shares issued and 3,939,460 outstanding at March 31, 2012 and 4,459,135 shares issued and 4,038,260 outstanding at December 31, 2011		44			45
Additional paid-in-capital		43,470			44,579
Common stock held by:
Nonqualified Deferred Compensation Plan		(1,847	)		(1,845	)
Employee Stock Ownership Plan		(2,860	)		(2,860	)
2008 Equity Incentive Plan		(1,107	)		(1,107	)
Retained earnings		25,603			24,900
Accumulated other comprehensive income		2,653			2,763
Total shareholders' equity		65,956			66,475
Total liabilities and shareholders' equity	$	366,500		$	366,149

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,
	2012		2011
Interest and dividend income
Loans	$	3,829	$	3,527
Investment securities		662		777
Other		65		66
Total interest and dividend income		4,556		4,370
Interest expense
Deposits		457		591
Borrowings		432		438
Total interest expense		889		1,029
Net interest income		3,667		3,341
Provision for loan losses		227		255
Net interest income after provision for loan losses		3,440		3,086
Non-interest income
Service charges on deposit accounts and other fees		298		282
Loan servicing and other fees		38		17
Net gains on sales of mortgage loans held for sale		205		207
Net realized gain on sales of available-for-sale securities		474		-
Insurance and brokerage commissions		23		26
Other		6		47
Total non-interest income		1,044		579
Non-interest expense
Salaries and employee benefits		1,542		1,732
Net occupancy expense		159		166
Equipment expense		162		187
Data processing fees		261		223
Professional fees		165		184
Marketing expense		80		76
Supplies and communication		92		72
Loan collection and repossession expense		15		-
Other		480		477
Total non-interest expense		2,956		3,117
Income before income taxes		1,528		548
Provision for income taxes		603		190
Net income	$	925	$	358
Per common share:
Basic net income per common share	$	0.23	$	0.09
Diluted net income per common share	$	0.22	$	0.08
Dividends declared per common share	$	0.05	$	0.05
Basic weighted average common shares outstanding		3,998,329		4,107,813
Diluted weighted average common shares outstanding		4,236,410		4,260,723

See accompanying notes to unaudited condensed consolidated financial statements.

First Advantage Bancorp
Unaudited - Condensed Consolidated Statements of Other Comprehensive Income
(Dollars in thousands)

	Three months ended
	March 31,
	2012		2011

Net income	$	925	$	358

Unrealized gains on available-for-sale securities		(653)		105
Less reclassification adjustment for realized gains included in income		(474)		-
Other comprehensive gains, before tax effect		(179)		105
Tax (benefit) expense		(69)		40
Other comprehensive (loss) income		(110)		65
Comprehensive income	$	815	$	423
See accompanying notes to unaudited condensed consolidated financial statements.

First Advantage Bancorp
Unaudited - Condensed Consolidated Statements of Shareholders' Equity
Three Months Ended March 31, 2012 and 2011
(Dollars in thousands, except share and per share amounts)
									Common			Accumulated
					Additional				Stock			Other		Total
	Common Stock				Paid-in		Retained		Acquired by			Comprehensive		Stockholders'
	Shares		Amount		Capital		Earnings		Benefit Plans			Income		Equity
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
Change in unrealized appreciation of available-for-sale securities, net of tax				-				-		-			65		65
Dividends paid ($0.05 per common share)				-				(234)		-			-		(234)
Purchase of shares by employee benefit plans						29		-		(29)			-		-
Stock-based compensation						298		-		-			-		298
Balance at March 31, 2011		4,632,494	$	46	$	46,953	$	24,047	$	(6,471)		$	2,639	$	67,214

Balance at January 1, 2012		4,459,135	$	45	$	44,579	$	24,900	$	(5,812	)	$	2,763	$	66,475
Comprehensive income, net of tax:
Net income				-		-		925		-			-		925
Change in unrealized appreciation of available-for-sale securities, net of tax													(110)		(110)
Treasury stock purchase/retire		(98,800)		(1)		(1,273)		-							(1,274)
Dividends paid ($0.05 per common share)				-		-		(222)		-			-		(222)
Purchase of shares by employee benefit plans						2		-		(2)			-		-
Stock-based compensation				-		162		-		-			-		162
Balance at March 31, 2012		4,360,335	$	44	$	43,470	$	25,603	$	(5,814)		$	2,653	$	65,956

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,
	2012			2011
Operating activities
Net income	$	925		$	358
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Provision for loan losses		227			255
Depreciation, amortization and accretion		235			201
Deferred income taxes		(170	)		-
Funding of mortgage loans held for sale		(8,055	)		(8,699	)
Proceeds from sales of mortgage loans held for sale		12,097			10,822
Net gains on sales of mortgage loans held for sale		(205	)		(207	)
Net gains on sale of available-for-sale securities		(474	)		-
Stock-based compensation		162			298
Decrease in other assets		(23	)		(3,171	)
Decrease in other liabilities		(1,608	)		(36	)
Net cash provided by (used in) operating activities		3,111			(179	)

Investing activities
Proceeds from maturities of other investments		-			1,494
Purchases of securities available for sale		(7,481	)		-
Proceeds from call/maturities and repayments of securities available-for-sale		7,093			5,271
Proceeds from sales of securities available-for-sale		474			-
Net decrease (increase) in loans		2,140			(997	)
Purchases of premises and equipment		(50	)		(141	)
Proceeds from sale of other real estate owned and repossessed assets		-			13
Net cash provided by investing activities		2,176			5,640

Financing activities
Net (decrease) increase in demand deposits, savings, checking and money market accounts		(3,536	)		4,188
Net increase (decrease) in time deposits		13,565			(4,693	)
Net decrease in short-term borrowings		(6,727	)		(790	)
Cash paid for dividends		(222	)		(234	)
Stock repurchased/retired - repurchase program		(1,274	)		-
Net cash provided by (used in) financing activities		1,806			(1,529	)
Increase in cash and cash equivalents		7,093			3,932
Cash and cash equivalents, beginning of period		10,756			7,788
Cash and cash equivalents, end of period	$	17,849		$	11,720
Supplemental cash flow information:
Other real estate owned acquired through foreclosure of real estate loans		138			-
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 Advantage Bank (the “Bank”) and the Bank’s subsidiaries. First Advantage Bank is a Tennessee chartered commercial bank, formerly known as First Federal Savings Bank, originally founded in 1953 and is headquartered in Clarksville, Tennessee. The Company uses the premises, equipment and other property of the Bank 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 the Bank. 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, 2012 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, 2011 filed with the United States Securities and Exchange Commission (the “SEC”) on March 9, 2012.

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

ASU 2011-11, “Balance Sheet (Topic 210) - “Disclosures about Offsetting Assets and Liabilities.” ASU 2011-11 amends Topic 210, “Balance Sheet,” to require an entity to disclose both gross and net information about financial instruments, such as sales and repurchase agreements and reverse sale and repurchase agreements and securities borrowing/lending arrangements, and derivative instruments that are eligible for offset in the statement of financial position and/or subject to a master netting arrangement or similar agreement. ASU 2011-11 is effective for annual and interim periods beginning on January 1, 2013, and is not expected to have a significant impact on the Company’s consolidated financial position, results of operation, cash flows, or disclosures.

ASU 2011-12 “Comprehensive Income (Topic 220) - Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” ASU 2011-12 defers changes in ASU No. 2011-05 that relate to the presentation of reclassification adjustments to allow the FASB time to redeliberate whether to require presentation of such adjustments on the face of the financial statements to show the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income. ASU 2011-12 allows entities to continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before ASU No. 2011-05. All other requirements in ASU No. 2011-05 are not affected by ASU No. 2011-12. ASU 2011-12 is effective for annual and interim periods beginning after December 15, 2011. In connection with the adoption of ASU No. 2011-12, in the first quarter of 2012, the company presented condensed consolidated statements of other comprehensive income in the accompanying financial statements.

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 Advantage 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,
	2012		2011
Net income	$	925	$	358


Weighted-average shares - Basic EPS		3,998,329		4,107,813
Weighted-average restricted shares -
2007 Deferred Compensation Plan		-		12,007
2008 Equity Incentive Plan		124,115		43,327
Weighted-average shares -
ESOP committed to be released - diluted EPS		113,966		97,576
Weighted-average shares - Diluted EPS		4,236,410		4,260,723
Basic earnings per common share	$	0.23	$	0.09
Diluted earnings per common share	$	0.22	$	0.08

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, 2012 and December 31, 2011:


	March 31, 2012						December 31, 2011
	Amount			Percent			Amount			Percent
	(Dollars in thousands)
Real estate loans:
Permanent loans:
One-to-four family	$	45,532			17.4	%	$	44,813			17.0	%
Multi-family		17,218			6.6			16,695			6.3
Nonresidential		98,543			37.7			98,278			37.3
Construction loans:
One-to-four family		18,875			7.2			18,618			7.1
Multi-family		2,977			1.2			2,357			0.9
Nonresidential		7,095			2.7			6,753			2.5
Land loans		24,888			9.5			25,409			9.6
Total real estate loans		215,128			82.3			212,923			80.7

Consumer:
Home equity loans and lines of credit		18,595			7.1			19,722			7.5
Auto loans		468			0.2			429			0.2
Deposit loans		371			0.2			321			0.1
Overdrafts		31			-			77			-
Other		2,359			0.9			1,828			0.7
Total consumer loans		21,824			8.4			22,377			8.5

Commercial loans		24,408			9.3			28,462			10.8

Total loans		261,360			100.0	%		263,762			100.0	%
Allowance for loan losses		(4,314	)					(4,316	)
Net deferred loan costs		121						88
Loans receivable, net	$	257,167					$	259,534

The following table sets forth certain information at March 31, 2012 and December 31, 2011 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 stated maturity are reported as due in one year or less.

		At March 31, 2012

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

Amounts due in:
One year or less		$	11,154	$	19,260	$	26,915	$	7,945	$	12,295	$	12,588	$	90,157
More than one year to three years			9,261		50,910		2,032		13,216		1,536		5,680		82,635
More than three years to five years			11,357		41,551		-		3,252		806		3,309		60,275
More than five years to fifteen years			7,793		4,040		-		475		7,187		2,831		22,326
More than fifteen years			5,967		-		-		-		-		-		5,967
Total		$	45,532	$	115,761	$	28,947	$	24,888	$	21,824	$	24,408	$	261,360


		At December 31, 2011

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

Amounts due in:
One year or less		$	9,942	$	12,231	$	25,977	$	14,289	$	11,637	$	17,041	$	91,117
More than one year to three years			10,457		56,586		1,751		7,610		1,645		7,651		85,700
More than three years to five years			11,244		40,319		-		3,032		1,011		3,448		59,054
More than five years to fifteen years			6,675		5,837		-		478		8,084		322		21,396
More than fifteen years			6,495		-		-		-		-		-		6,495
Total		$	44,813	$	114,973	$	27,728	$	25,409	$	22,377	$	28,462	$	263,762

The following tables set forth the dollar amount of all loans at March 31, 2012 that are due after March 31, 2013, and at December 31, 2011 that are due after December 31, 2012, and have either fixed interest rates or floating or adjustable interest rates:

As of March 31, 2012			Floating or
	Fixed Rates		Adjustable Rates		Total
	(Dollars in thousands)
One-to-four family	$	33,456	$	922	$	34,378
Multi-family and nonresidential		87,838		8,663		96,501
Construction		214		1,818		2,032
Land		3,003		13,940		16,943
Consumer		2,938		6,591		9,529
Commercial		10,344		1,476		11,820
Total	$	137,793	$	33,410	$	171,203


As of December 31, 2011			Floating or
	Fixed Rates		Adjustable Rates		Total
	(Dollars in thousands)
One-to-four family	$	33,873	$	998	$	34,871
Multi-family and nonresidential		93,484		9,258		102,742
Construction		213		1,538		1,751
Land		3,045		8,076		11,121
Consumer		3,293		7,446		10,739
Commercial		10,061		1,360		11,421
Total	$	143,969	$	28,676	$	172,645

Our adjustable-rate mortgage loans do not adjust downward below the initial discounted contract rate. When market rates rise 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 interest income. Typically, payments received on a non-accrual loan are first applied to the outstanding principal balance. At March 31, 2012 and December 31, 2011, non-accruing loans were $2.6 million and $2.8 million, respectively. Had non-accrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income, net of tax, of approximately $77,000 for the first three months of 2012. No interest income was recognized on non-accrual loans on a cash basis during the first three months of 2012 or during 2011.

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

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

Nonperforming Assets	At March 31,			At December 31,
	2012			2011
	(Dollars in thousands)

Non-accrual loans:
One- to four-family	$	1,580		$	2,135
Multi-family and nonresidential		-			-
Construction		292			-
Land		-			-
Consumer		209			254
Commercial		561			399
Total		2,642			2,788

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		2,642			2,788
more past due loans


Real estate owned		1,555			1,391
Other nonperforming assets		-			-
Total nonperforming assets	$	4,197		$	4,179

Total nonperforming loans to total loans		1.01	%		1.06	%
Total nonperforming loans to total assets		0.72	%		0.76	%
Total nonperforming assets to total assets		1.15	%		1.14	%

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 collectibility. 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.

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 collectibility. 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.

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 collectibility 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.

At March 31, 2012, our allowance for loan losses represented 1.7% of total gross loans and 163.3% of nonperforming loans. At December 31, 2011, our allowance for loan losses represented 1.6% of total gross loans and 154.8% of nonperforming loans. The allowance for loan losses decreased $2,000 at March 31, 2012, as compared to December 31, 2011, due to $238,000 in charge offs during the first quarter of 2012 which were partially offset by $227,000 in allowance provision and $9,000 in recoveries from charged off loans during the first quarter of 2012.

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,
	2012								2011
						% 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	$	404		9.4	%		17.4	%	$	476		11.0	%		17.0	%
Multi-family and nonresidential		1,111		25.7			44.3			1,063		24.6			43.6
Construction		400		9.3			11.1			400		9.3			10.5
Land		641		14.9			9.5			614		14.2			9.6
Consumer		252		5.8			8.4			296		6.9			8.5
Commercial		1,506		34.9			9.3			1,467		34.0			10.8
Total allowance for loan losses	$	4,314		100.0	%		100.0	%	$	4,316		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 our regulators, in reviewing our loan portfolio, will not require us to increase our allowance for loan losses. Our regulators 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 three months ended March 31, 2012 and 2011:

Allowance for Loan Losses and Recorded Investment in Loans
For the Three Months Ended March 31, 2012
(Dollars in thousands)

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

Allowance for loan losses:

Beginning balance	$	476		$	1,063	$	400	$	614	$	296		$	1,467		$	-	$	4,316
Charge offs		(212	)		-		-		-		(11	)		(15	)		-	$	(238	)
Recoveries		-			6		-		-		1			2			-	$	9
Provision (Credit)		140			42		-		27		(34	)		52			-	$	227
Ending balance	$	404		$	1,111	$	400	$	641	$	252		$	1,506		$	-	$	4,314

Ending balance individually evaluated for impairment	$	50		$	-	$	-	$	-	$	-		$	379		$	-	$	429

Ending balance collectively evaluated for impairment	$	354		$	1,111	$	400	$	641	$	252		$	1,127		$	-	$	3,885

Loans:

Ending balance	$	45,532		$	115,761	$	28,947	$	24,888	$	21,824		$	24,408		$	-	$	261,360

Ending balance individually evaluated for impairment	$	907		$	234	$	-	$	-	$	160		$	800		$	-	$	2,101

Ending balance collectively evaluated for impairment	$	44,625		$	115,527	$	28,947	$	24,888	$	21,664		$	23,608		$	-	$	259,259

Allowance for Loan Losses and Recorded Investment in Loans
For the Three Months 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

The following table shows credit quality indicators at March 31, 2012 and December 31, 2011:

Credit Quality Indicators as of March 31, 2012
(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	$	42,568	$	111,552	$	28,090	$	22,142	$	21,470	$	23,208	$	249,030
Special mention		836		1,386		137		167		156		464		3,146
Substandard		2,128		2,823		720		2,579		198		525		8,973
Doubtful		-		-		-		-		-		211		211
Total	$	45,532	$	115,761	$	28,947	$	24,888	$	21,824	$	24,408	$	261,360

Credit Quality Indicators as of December 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	$	41,534	$	111,213	$	26,403	$	25,195	$	21,971	$	27,353	$	253,669
Special mention		840		1,398		137		168		163		472		3,178
Substandard		2,439		2,362		1,188		46		243		426		6,704
Doubtful		-		-		-		-		-		211		211
Total	$	44,813	$	114,973	$	27,728	$	25,409	$	22,377	$	28,462	$	263,762

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, 2012.

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, 2012 based upon past due status as of that date.

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

Age Analysis of Past Due Loans
As of March 31, 2012
(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	$	935	$	412	$	1,065	$	2,412	$	43,120	$	45,532	$	-
Multifamily/nonresidential		-		-		-		-		115,761		115,761		-
Construction		-		-		291		291		28,656		28,947		-
Land		-		-		-		-		24,888		24,888		-
Consumer and other		138		8		160		306		21,518		21,824		-
Commercial		179		24		561		764		23,644		24,408		-
Total	$	1,252	$	444	$	2,077	$	3,773	$	257,587	$	261,360	$	-

Age Analysis of Past Due Loans
As of December 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	$	889	$	172	$	1,300	$	2,361	$	42,452	$	44,813	$	-
Multifamily/nonresidential		-		237		-		237		114,736		114,973		-
Construction		292		-		-		292		27,436		27,728		-
Land		-		-		-		-		25,409		25,409		-
Consumer and other		303		23		159		485		21,892		22,377		-
Commercial		269		189		385		843		27,619		28,462		-
Total	$	1,753	$	621	$	1,844	$	4,218	$	259,544	$	263,762	$	-

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

Impaired Loans
For the Three Months Ended March 31, 2012
(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	$	700	$	868	$	-	$	858	$	-
Multifamily/nonresidential		234		234		-		235		7
Construction		-		-		-		-		-
Land		-		-		-		-		-
Consumer and other		160		201		-		160		-
Commercial		165		230		-		166		-
Subtotal		1,259		1,533		-		1,419		7

With an allowance recorded:
One-to-four family		207		207		50		207		-
Multifamily/nonresidential		-		-		-		-		-
Construction		-		-		-		-		-
Land		-		-		-		-		-
Consumer and other		-		-		-		-		-
Commercial		635		655		379		637		7
Subtotal		842		862		429		844		7

Total:
One-to-four family		907		1,075		50		1,065		-
Multifamily/nonresidential		234		234		-		235		7
Construction		-		-		-		-		-
Land		-		-		-		-		-
Consumer and other		160		201		-		160		-
Commercial		800		885		379		803		7
Total	$	2,101	$	2,395	$	429	$	2,263	$	14

Impaired Loans
For the Twelve Months Ended December 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		237		237		-		237		-
Construction		-		-		-		-		-
Land		-		-		-		-		-
Consumer and other		-		-		-		-		-
Commercial		166		218		-		166		-
Subtotal		403		455		-		403		-

With an allowance recorded:
One-to-four family		655		655		50		659		28
Multifamily/nonresidential		-		-		-		-		-
Construction		-		-		-		-		-
Land		-		-		-		-		-
Consumer and other		203		203		117		204		7
Commercial		655		675		394		596		22
Subtotal		1,513		1,533		561		1,459		57

Total:
One-to-four family		655		655		50		659		28
Multifamily/nonresidential		237		237		-		237		-
Construction		-		-		-		-		-
Land		-		-		-		-		-
Consumer and other		203		203		117		204		7
Commercial		821		893		394		762		22
Total	$	1,916	$	1,988	$	561	$	1,862	$	57

No interest was recognized on impaired loans on a cash basis during the three month period ended March 31, 2012 or the year ended December 31, 2011.

Troubled Debt Restructurings

The following table sets forth information about modifications which were considered troubled debt restructurings (“TDRs”) as of March 31, 2012 and December 31, 2011.

Modifications
As of March 31, 2012
(Dollars in thousands)
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings
One-to-four family		1	$	168	$	162
Consumer and other		1		40		40
Commercial		2		237		224
Total		4	$	445	$	426


Troubled Debt Restructurings That Subsequently Defaulted	Number of Contracts		Pre-Modification Outstanding Recorded Investment
Troubled debt restructurings
One-to-four family		1	$	168
Consumer and other		-		-
Commercial		-		-

Modifications
As of December 31, 2011
(Dollars in thousands)
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings
One-to-four family		1	$	168	$	165
Consumer and Other		1		40		40
Commercial		2		237		231
Total		4	$	445	$	436

Troubled Debt Restructurings That Subsequently Defaulted	Number of Contracts		Pre-Modification Outstanding Recorded Investment
Troubled debt restructurings
One-to-four family		1	$	168
Consumer and other		-		-
Commercial		-		-

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 both March 31, 2012 and 2011. Loans characterized as TDRs totaled $426,000 at March 31, 2012, compared to $436,000 at December 31, 2011. The TDR total of $426,000 and $436,000 at March 31, 2012 and December 31, 2011, respectively, is comprised of four performing loans. One is comprised of a single commercial real estate loan, which was identified as a TDR at December 31, 2011 and March 31, 2012. Another TDR consists of one single family residential loan in the amount of $162,000. This loan was reported to be in foreclosure eligibility status at December 31, 2011; however, during the first quarter of 2012 the loan was brought current by the customer and foreclosure proceedings were ceased. Management continues to monitor the status of this loan. The remaining TDRs consist of one consumer loan and one commercial loan which total $99,000 and both are paying as agreed under the restructured terms.

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, 2012
(Dollars in thousands)
			Gross		Gross			Approximate
	Amortized		Unrealized		Unrealized			Fair
Available-for-sale	Cost		Gains		Losses			Value
U. S. Treasury	$	4,682	$	1,283	$	-		$	5,965
U. S. Government agencies and corporations		11,481		1		(133	)		11,349
Mortgage-backed securities		36,950		2,625		-			39,575
Collateralized mortgage obligations		2,579		33		-			2,612
State and political subdivisions		10,173		491		-			10,664
Corporate debt securities		-		-		-			-
Total	$	65,865	$	4,433	$	(133	)	$	70,165

December 31, 2011
(Dollars in thousands)
			Gross		Gross			Approximate
	Amortized		Unrealized		Unrealized			Fair
Available-for-sale	Cost		Gains		Losses			Value
U. S. Treasury	$	4,692	$	1,383	$	-		$	6,075
U. S. Government agencies and corporations		8,000		22		-			8,022
Mortgage-backed securities		40,097		2,799		-			42,896
Collateralized mortgage obligations		2,611		-		(121	)		2,490
State and political subdivisions		10,163		463		(7	)		10,619
Corporate debt securities		2		175		-			177
Total	$	65,565	$	4,842	$	(128	)	$	70,279

Contractual maturities of debt securities at March 31, 2012 are set forth in the table below. 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, 2012
	Amortized		Fair
	Cost		Value
	(Dollars in thousands)
Within one year	$	-	$	-
One to five years		5,698		7,079
Five to 10 years		4,009		4,238
After 10 years		19,208		19,273
		28,915		30,590
Mortgage-backed securities		36,950		39,575
Total	$	65,865	$	70,165

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, 2012
	(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	$	10,848	$	(133	)	$	-	$	-	$	10,848	$	(133	)
Total	$	10,848	$	(133	)	$	-	$	-	$	10,848	$	(133	)


	December 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
Collateralized mortgage obligations	$	2,490	$	(121	)	$	-	$	-	$	2,490	$	(121	)
State and political subdivisions		766		(7	)		-		-		766		(7	)
Total	$	3,256	$	(128	)	$	-	$	-	$	3,256	$	(128	)

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, 2012	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	$	5,965	$	5,965	$	-	$	-
U. S. Government		11,349		-		11,349		-
Mortgage-backed securities		39,575		-		39,575		-
Collateralized mortgage obligations		2,612		-		2,612		-
State and political subdivisions		10,664		-		10,664		-

December 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	$	6,075	$	6,075	$	-	$	-
U.S. Government agencies		8,022		-		8,022		-
Mortgage-backed securities		42,896		-		42,896		-
Collateralized mortgage obligations		2,490		-		2,490		-
State and political subdivisions		10,619		-		10,619		-
Corporate debt securities		177		-		-		177

Activity in assets measured using Level 3 inputs during the year was as follows:
Balance, January 1, 2011	$	57
Paydowns		(55	)
Unrealized gains included in other comprehensive income		175
Balance, December 31, 2011	$	177

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, 2012 and December 31, 2011.

March 31, 2012	Level 1		Level 2		Level 3		Nonrecurring Fair Value Adjustments Three Months Ended March 31, 2012
(Dollars in thousands)
Impaired loans		--		--	$	842	$	(90	)

December 31, 2011	Level 1		Level 2		Level 3		Nonrecurring Fair Value Adjustments Twelve Months Ended December 31, 2011
(Dollars in thousands)
Impaired loans		--		--	$	1,513	$	(561	)
Other real estate owned		--		--		1,391		( 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, 2012 and December 31, 2011.

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, 2012						At December 31, 2011
	Carrying Amount			Fair Value			Carrying Amount			Fair Value

	(Dollars in thousands)
Financial assets
Cash and cash equivalents	$	17,849		$	17,849		$	10,756		$	10,756
Available-for-sale securities		70,165			70,165			70,279			70,279
Loans held for sale		1,672			1,672			5,509			5,509
Loans, net of allowance for loan losses		257,167			260,244			259,534			262,715
FHLB stock		2,988			2,988			2,988			2,988
Forward sale commitments		-			-			(2	)		(2	)

Financial liabilities
Deposits	$	242,613		$	242,897		$	232,584		$	232,841
Securities sold under agreement to repurchase		7,949			7,949			4,176			4,176
FHLB advances		13,000			13,796			23,500			24,329
Other borrowings		35,000			37,478			35,000			37,478
Interest rate lock commitments		(1	)		(1	)		(1	)		(1	)

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 and Other Long-term Debt

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.

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, 2011, as filed with the SEC on March 9, 2012.

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 Advantage Bank’s market area, changes in real estate market values in First Advantage 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, 2012, the Company had total assets of $366.5 million, deposits of $242.6 million and shareholders’ equity of $66.0 million. Unless otherwise indicated, all references to the Company refer collectively to the Company and the Bank.

Recent Developments.

On February 2, 2012, as previously announced, the Bank completed its conversion from a federally chartered savings bank to a Tennessee-chartered commercial bank. On the same date, the Company also completed its conversion from a savings and loan holding company to a bank holding company. The Bank is now regulated by the Tennessee Department of Financial Institutions and the Federal Deposit Insurance Corporation and the Board of Governors of the Federal Reserve System (the “Federal Reserve”) is the federal regulator for the Company.

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 2012.

Comparison of Financial Condition at March 31, 2012 and December 31, 2011

Total Assets. At March 31, 2012, total assets were $366.5 million, an increase of $351,000, compared to $366.1 million at December 31, 2011.

Cash and Cash Equivalents. Cash and cash equivalents were $17.8 million at March 31, 2012 compared to $10.8 million at December 31, 2011. The increase was primarily due to interest-bearing demand deposits with banks which were $10.9 million at March 31, 2012, compared to $1.7 million at December 31, 2011.

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. Total securities decreased slightly from $70.3 million at December 31, 2011 to $70.2 million at March 31, 2012.

Loans. Net loans were $257.2 million, a decrease of $2.4 million, or 0.9% at March 31, 2012 compared to $259.5 million as of December 31, 2011. Our primary lending activity is the origination of loans secured by real estate, which grew to $215.1 million at March 31, 2012 compared to $212.9 million as of December 31, 2011. 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 remained unchanged at $4.3 million for the comparable periods ending March 31, 2012 and December 31, 2011.

There was a 20.9% increase in the level of classified assets from $11.5 million at December 31, 2011 to $13.9 million at March 31, 2012 primarily related to the land portfolio. Classified assets are primarily loans rated special mention or substandard in accordance with regulatory guidance. These assets warrant and receive increased management oversight and loan loss reserves have been established to account for the increased credit risk of these assets.

Deposits. Total deposits increased by $10.0 million, or 4.3% to $242.6 million at March 31, 2012 compared to $232.6 million as of December 31, 2011. The increase was primarily due to higher balances in time certificates accounts which totaled $83.7 million at March 31, 2012, as compared to a total of $70.2 million at December 31, 2011.

Borrowings. Total borrowings with other banks remained unchanged and totaled $35.0 million at both March 31, 2012 and at December 31, 2011. FHLB advances also remained unchanged and totaled $13.0 million at both March 31, 2012 and December 31, 2011. Securities sold under agreements to repurchase totaled $7.9 million as of March 31, 2012 compared to $4.2 million as of December 31, 2011.

Other Liabilities. Total other liabilities decreased by $2.4 million, or 55.1% to $2.0 million at March 31, 2012 compared to $4.4 million at December 31, 2011.

Shareholders’ Equity. Total shareholders’ equity decreased slightly to $66.0 million as of March 31, 2012, compared to $66.5 million as of December 31, 2011.

Comparison of Operating Results for the Three Months Ended March 31, 2012 and 2011

General. Net income for the three months ended March 31, 2012 was $925,000, an increase of 158.4% compared to net income of $358,000 for the three months ended March 31, 2011. The increase was primarily due to an increase of $465,000 in total non-interest income for the three months ended March 31, 2012 and a $354,000 increase in net interest income after provision for loan losses for the three months ended March 31, 2012. First quarter results were positively impacted by a gain of $474,000 ($293,000 after tax) from the sale of available-for-sale securities related to investments in pooled trust preferred securities (“PreTSLs”).

Net Interest Income. Net interest income increased $326,000, or 9.8%, to $3.7 million for the three months ended March 31, 2012 compared to the three months ended March 31, 2011. Total interest income increased $186,000, or 4.3% to $4.6 million for the three months ended March 31, 2012 compared to the three months ended March 31, 2011.

Interest income on loans increased by 8.6% to $3.8 million for the three months ended March 31, 2012 compared to the three months ended March 31, 2011 as average outstanding loans increased $22.1 million, or 9.2%, to $261.4 million, while the yield on the portfolio decreased nine basis points from the same period one year ago.

Interest income on investment securities decreased by $115,000, or 14.8%, to $662,000 for the three months ended March 31, 2012 from the same period one year ago as average balances decreased $2.0 million and average yields decreased fifty-seven basis points. The primary reasons for the decline in average balances during the period was due to calls and maturities of high interest securities, of which, funds were reinvested in similar securities with lower yields and accelerated prepayments on mortgage backed securities due to falling interest rates.

Total interest expense decreased by $140,000 or 13.6% to $889,000 for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011. The average balance of interest-bearing deposits increased 6.2% to $208.3 million for the quarter ended March 31, 2012 as compared to the quarter ended March 31, 2011. Interest paid on interest-bearing deposits decreased by $134,000, or 22.7%, to $457,000 for the three month period ended March 31, 2012 as the average interest rate paid declined thirty-four basis points, primarily as a result of lower interest rates paid to customers as higher rate fixed-term deposits matured and on transaction accounts as market rates declined. The average interest rate paid on FHLB advances and other borrowings, which consisted of long-term FHLB advances and securities sold under agreements to repurchase, decreased by seventy-three basis points in the first quarter of 2012 as average balances of FHLB advances and other borrowings increased to an average of $22.3 million for the quarter ended March 31, 2012 compared to average balances of $17.9 million for the quarter ended March 31, 2011. The average balance of long-term borrowings at other banks remained unchanged at $35.0 million for the quarter ended March 31, 2012 compared to the quarter ended March 31, 2011, as the interest rate paid on the borrowings increased one basis point during the same period.

The following table summarizes average balances and average yields and costs for the three months ended March 31, 2012 and 2011.

	Average Balance Sheet for the
	Three Months Ended March 31,
			2012							2011

			Interest							Interest
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Rate			Balance		Expense		Rate
			(Dollars in thousands)
ASSETS:
Interest-earning assets:
Interest-earning deposits	$	5,109	$	3		0.24	%	$	8,513	$	11		0.52	%
Loans		261,409		3,829		5.89	%		239,298		3,527		5.98	%
Investment securities		69,745		662		3.82	%		71,770		777		4.39	%
Other interest-earning assets		5,302		62		4.70	%		4,731		55		4.71	%
Total interest-earning assets		341,565		4,556		5.36	%		324,312		4,370		5.46	%

Noninterest-earning assets		16,522							15,475
Total	$	358,087						$	339,787


LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing deposits		208,322		457		0.88	%		196,197		591		1.22	%
FHLB advances and other borrowings		22,254		107		1.93	%		17,852		117		2.66	%
Long-term borrowings at other banks		35,000		325		3.73	%		35,000		321		3.72	%
Total interest-bearing liabilities		265,576		889		1.35	%		249,049		1,029		1.68	%

Noninterest-bearing deposits		23,856							21,674
Other noninterest-bearing liabilities		2,037							2,061
Shareholders' equity		66,618							67,003

Total	$	358,087						$	339,787


Net Interest Income			$	3,667						$	3,341


Net Interest Margin						4.32	%						4.18	%


Interest rate spread						4.01	%						3.79	%

Average interest-earning assets to
average interest-bearing liabilities						128.61	%						130.22	%

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, 2012 Compared to March 31, 2011
	Increase (Decrease) Due To
	Volume			Rate			Net
	(Dollars in thousands)
Interest earned on:
Interest-earning assets:
Interest-earning demand deposits	$	3		$	(11	)	$	(8	)
Loans		504			(202	)		302
Investment securities		255			(370	)		(115	)
Other interest-earning assets		7			0			7
Total Earning Assets		769			(583	)		186

Interest paid on:
Interest bearing deposits		827			(961	)		(134	)
FHLB advances and other borrowings		(69	)		59			(10	)
Long-term borrowings at other banks		(3	)		7			4
Total Interest-Bearing Liabilities		755			(895	)		(140	)
Change in Net Interest Income	$	14		$	312		$	326

Provision for Loan Losses. The Company recorded a provision for loan losses of $227,000 for the three months ended March 31, 2012 compared to a provision of $255,000 for the three months ended March 31, 2011. 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.

Non-interest Income. The following table summarizes non-interest income for the three months ended March 31, 2012 and 2011 and the percentage change for each category of income.

	Three Months Ended March 31,
	2012		2011		% Change
	(Dollars in thousands)
Non-interest Income
Service charges on deposit accounts and other fees	$	298	$	282		5.67	%
Loan servicing and other fees		38		17		123.53
Net gains on sales of mortgage loans held for sale		205		207		(0.97	)
Net realized gain on sales of available-for-sale securities		474		-		-
Insurance and brokerage commissions		23		26		(11.54	)
Other		6		47		(87.23	)
Total non-interest income	$	1,044	$	579		80.31	%

Non-interest income for the three months ended March 31, 2012 increased by $465,000 to a total of $1.0 million compared to $579,000 for the three months ended March 31, 2011. The increase in total non-interest income for the three months ended March 31, 2012 was primarily due to an increase in the net realized gain on sales of available-for-sale securities of $474,000. This positive impact to non-interest income was somewhat offset by a decrease in other income of $41,000 at March 31, 2012 compared to March 31, 2011 which was primarily related to the realization of profit on the sale of other real estate owned at March 31, 2011.

Non-interest Expense. The following table summarizes non-interest expense for the three months ended March 31, 2012 and 2011 and the percentage change for each expense category.

	Three Months Ended March 31,
	2012		2011		% Change
	(Dollars in Thousands)
Non-interest Expense
Salaries and employee benefits	$	1,542	$	1,732		(10.97)	%
Net occupancy expense		159		166		(4.22)
Equipment expense		162		187		(13.37)
Data processing fees		261		223		17.04
Professional fees		165		184		(10.33)
Marketing expense		80		76		5.26
Supplies and communication		92		72		27.78
Loan collection and repossession expense		15		-		-
Other		480		477		0.63
Total non-interest expense	$	2,956	$	3,117		(5.17)	%

Total non-interest expense decreased by $161,000, or 5.2% to $3.0 million for the three months ended March 31, 2012 as compared to the same period in 2011. The decline was primarily due to a decrease in salaries and employee benefits of $190,000, or 11.0%, to $1.5 million at March 31, 2012 as compared to March 31, 2011 and equipment expense which decreased $25,000, or 13.4%, to $162,000 at March 31, 2012 as compared to the same period in 2011. These decreases in non-interest expense were partially offset by increases in data processing fees of $38,000 or 17.0%, to $261,000 at March 31, 2012 as compared to March 31, 2011. Supplies and communication expense also increased $20,000, or 27.8%, during the first quarter of 2012 compared to the first quarter of 2011.

Income Taxes. Income tax expense for the three months ended March 31, 2012 was $603,000 compared to $190,000 for the same period in 2011. The effective income tax rate for the three months ended March 31, 2012 was 39.5% compared to 34.7% for the three months ended March 31, 2011. The increase in income tax expense for the three months ended March 31, 2012 was primarily due to an increase in taxable income and from changes in permanent differences.

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 its 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 its 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, 2012, cash and cash equivalents totaled $17.8 million. Securities classified as available-for-sale, totaling $70.2 million at March 31, 2012, provide additional sources of liquidity. In addition, at March 31, 2012, the Bank’s maximum collateral borrowing capacity was approximately $54.5 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 $43.5 million. At March 31, 2012, the Bank had $13.0 million of Federal Home Loan Bank advances outstanding. At March 31, 2012, the Bank did not have any advances outstanding through the Discount Window.

At March 31, 2012, the Company (on an unconsolidated basis) had liquid assets of $28.1 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 federal banking agencies, 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 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, 2012			December 31, 2011
Tier 1 Core Capital (to adjusted total assets)		14.43	%		13.88	%
Tangible Equity Ratio (to tangible assets)		14.43	%		13.88	%
Tier 1 Risk-Based Capital (to risk-weighted assets)		19.14	%		17.96	%
Total Risk-Based Capital (to risk-weighted assets)		20.39	%		19.03	%

Dividends. The Board of Directors of the Company declared and will pay dividends per common share of $0.05 for the first quarter of 2012. The dividend payout ratio for the first quarter of 2012, representing dividends per share divided by diluted earnings per share, was 22.7%. 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, 2012, the Company did not engage in any off-balance sheet transactions reasonably likely to have a material effect on its 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. 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, 2012, 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, 2011, as filed with the SEC on March 9, 2012.

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, 2012 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, 2012, the 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, 2011, as filed with the SEC on March 9, 2012. As of March 31, 2012, 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 five 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. On February 16, 2012, a fifth repurchase program was approved which authorized the repurchase of up to 220,706 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 2012.

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, 2012 to January 31, 2012		15,000	$	12.750		15,000		353,523
February 1, 2012 to February 29, 2012		37,600		12.750		37,600		315,923
March 1, 2012 to March 31, 2012		46,200		12.950		46,200		269,723
Total		98,800	$	12.844		98,800		269,723

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable

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
101*		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, formatted in XBRL (Extenible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Shareholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to Condensed Consolidated Financial Statements

*		Furnished, not filed
(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 11, 2012	By: /s/ Earl O. Bradley, III
	Earl O. Bradley, III
	Chief Executive Officer



Dated: May 11, 2012	By: /s/ Bonita H. Spiegl
	Bonita H. Spiegl
	Chief Financial Officer