commentletterfirstadvantage.htm

We have reviewed the commission’s comments on the First Advantage Bancorp (the “Company”) Form 10-K for fiscal year ended December 31, 2009 and Forms 10-Q for the quarters ended March 31, 2010 and June 30, 2010 provided in your letter dated August 13, 2010. We appreciate your comments and respectfully submit our responses for your review. This letter supplements our response filed on August 20, 2010. Our responses are aligned with the sequential number of the comments in your letter dated August 13, 2010.

Please revise your future fillings to disclose how you evaluate loans with interest reserves for collectability prior to the loan’s maturity. Discuss how you monitor the collateral and projects over the life of the loan. Identify instances during the periods presented where you have extended additional interest reserves on existing loan relationships beyond the amounts contemplated at origination.

Loans with Interest Reserves. In the normal course of business, residential acquisition, development and construction, commercial construction or commercial land/development loan agreements may be originated where interest on the loan is disbursed from pre-established interest reserves included in the total original loan commitment. Our construction and land development loans generally include optional renewal terms after the maturity of the initial loan term. Loans with interest reserves are underwritten using the same criteria, including loan to value and, if applicable, pro forma debt service coverage ratios, as loans without interest reserves. Construction loans with interest reserves are closely monitored through physical inspections on a periodic basis to gauge progress towards completion. Interest reserves are frozen if it is determined that additional draws would result in a loan to value ratio that exceeds policy maximums based on collateral property type. During the current reporting period the Bank has not extended any additional reserves on existing loan relationships beyond the amounts contemplated at origination.

Balance Sheet Analysis – Loans, page 33

We note your disclosure on page 34 that “The balance of one-to-four family loans increased during the year primarily due to the migration of maturing one-to-four family construction loans to permanent one-to-four family loans.” Please revise your future filings to disclose whether these loans were made on market terms and whether this trend is typical of your normal lending activities or a result of the borrower’s lack of ability to find financing elsewhere. If these loans are not made on market terms, please disclose how you concluded that they should not be accounted for as troubled debt restructurings.

Please be advised that the Company will revise future filings to disclose the requested additional information as appropriate (depending on portfolio growth and the nature of such growth). The Company’s proposed disclosure as it would have appeared in the December 31, 2009 10-K would have been as follows:

The balance of one-to-four family loans increased during the year primarily due to the migration of maturing one-to-four family construction loans to permanent one-to-four family loans. Such loans were made in the typical course of business and on market terms, based on either original construction-to-permanent loan agreements with individuals or contractual curtailment terms with building contractors on speculative construction loans.

We note your statement on page 53 that your financial statements are included beginning on page F-1. We also note that in your EDGAR filings, it appears that your financial statements are “tagged” as being Exhibit 99.15. Please correct your future Form 10-K filings so that your financial statements are filed and “tagged” in accordance with the rules and requirements of Form 10-K and Regulation S-K.

First Advantage Bancorp
Consolidated Statements of Operations
(Dollars in thousands)
	Years Ended December 31,
	2009			2008
Interest and Dividend Income
Loans	$	11,371		$	9,169
Investment securities		5,585			7,720
Other		276			396
Total interest and dividend income		17,232			17,285
Interest Expense
Deposits		4,518			4,754
Securities sold under agreements to repurchase and other short-term borrowings		127			162
Federal Home Loan Bank advances		418			814
Borrowings with other banks		1,304			872
Total interest expense		6,367			6,602
Net Interest Income		10,865			10,683
Provision for loan losses		868			685
Net Interest Income After Provision for Loan Losses		9,997			9,998
Non-interest Income
Customer service and other fees		1,277			1,201
Loan servicing and other fees		74			49
Net gains on sales of loan held for sale		1,213			608
Net realized gain (loss) on sales of available-for-sale securities		7			(2,656	)
Other-than-temporary impairment on available-for-sale securities		(1,091	)		(13,577	)
Net realized gain on sales of other assets held-for-sale		-			295
Commissions on insurance and brokerage		158			292
Net loss on premises and equipment		(17	)		(37	)
Other		28			29
Total non-interest income		1,649			(13,796	)
Non-interest Expense
Salaries and employee benefits		5,951			5,825
Net occupancy expense		635			512
Equipment expense		671			598
Data processing fees		863			784
Professional fees		424			601
Marketing expense		285			288
Office expense		328			271
Loan collection and repossession expense		19			4
Insurance expense		80			86
Mortgage loan outsourced servicing		31			38
Other		1,864			1,138
Total non-interest expense		11,151			10,145
Income (Loss) Before Income Taxes		495			(13,943	)
Provision (Credit) for Income Taxes		135			(5,848	)
Net Income (Loss)	$	360		$	(8,095	)

Basic Earnings Per Common Share		0.08			(1.73	)
Diluted Earnings Per Common Share		0.08			(1.73	)

	At December 31,
	2009		2008			2007			2006			2005
	(Dollars in thousands)
Financial Condition Data:
Total assets	$	344,224	$	338,404		$	253,403		$	213,419		$	220,725
Cash and due from banks		9,204		7,991			3,209			1,754			2,415
Interest-bearing demand deposits and time deposits at other banks		1,686		4,243			970			5,631			8,746
Federal funds sold		975		9			4,897			9,364			9,000
Available-for-sale securities, fair value		98,736		129,076			112,817			83,519			67,866
Loans available-for-sale		2,265		866			1,867			1,400			777
Loans receivable, net		211,137		176,412			115,959			98,370			120,063
Deposits		216,240		186,807			169,854			176,609			171,140
Federal Home Loan Bank advances and borrowings at other banks		48,000		73,550			-			-			12,159
Total equity		70,526		70,261			79,505			32,889			32,535
	For the Year Ended December 31,
		2009		2008			2007			2006			2005
Operating Data:	(Dollars in thousands)
Interest and dividend income	$	17,232	$	17,285		$	13,253		$	12,406		$	12,719
Interest expense		6,367		6,602			6,016			5,153			3,979
Net interest income		10,865		10,683			7,237			7,253			8,740
Provision (credit) for loan losses		868		685			(364	)		(736	)		91
Net interest income after provision (credit) for loan losses		9,997		9,998			7,601			7,989			8,649
Non-interest income (1) (3) (4) (5)		1,649		(13,796	)		1,987			2,536			12,006
Non-interest expense (2)		11,151		10,145			10,060			9,525			11,689
Income (loss) before provision (credit) for income taxes		495		(13,943	)		(472	)		1,000			8,966
Provision (credit) for income taxes		135		(5,848	)		(217	)		375			3,426
Net income (loss)	$	360	$	(8,095	)	$	(255	)	$	625		$	5,540

Basic Earnings Per Common Share		0.08		(1.73	)		N/A			N/A			N/A
Diluted Earnings Per Common Share		0.08		(1.73	)		N/A			N/A			N/A

Please be advised that the Company will include the requested information in future filings. Our proposed disclosure for the impacted item as it would have appeared in the December 31, 2009 Form 10-K consists of: 1) adding the table below to Note 5: Loans and Allowance for Loan Losses after the paragraph concerning non-accrual loans and; 2) adding the following italicized language to our disclosure about impaired loans as it appeared in our December 31, 2009 10-K:

Impaired loans totaled $948 at December 31, 2009 and primarily consisted of one-to-four family residential loans. There were no loans classified as impaired as of December 31, 2008. Interest of $21 and $22 was recognized on average impaired loan of $951 and $245 for the years ended December 31, 2009 and 2008, respectively. No interest was recognized on impaired loans on a cash basis during the years ended December 31, 2009 and 2008, respectively. The allocated allowance for loan losses attributable to impaired loans totaled $141 and $0 for the years ended December 31, 2009 and 2008, respectively.

Please be advised that the Company will include the requested information in future filings. In the Form 10-Q for the quarter ended June 30, 2010 we would have replaced “NOTE 4 – ACTIVITY IN ALLOWANCE FOR LOAN LOSSES” with “NOTE 4 – LOANS,” which would have included the following table and discussion. Note that this section is repeated as part of the full proposed NOTE 4 as presented in response to comment number 12 below.

	At June 30,								At December 31,
	2010								2009
						% 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
	($ in thousands)								($ in thousands)
One-to-four family	$	280		9.4	%		19.2	%	$	280		10.0	%		20.8	%
Multi-family and nonresidential		1,117		37.4			39.1			1,125		40.0			36.8
Construction		160		5.4			13.5			160		5.7			12.2
Land		335		11.2			8.8			286		10.2			9.7
Consumer		200		6.7			9.1			200		7.1			9.3
Commercial		893		29.9			10.3			762		27.1			11.2
Total allowance for loan losses	$	2,985		100.0	%		100.0	%	$	2,813		100.0	%		100.0	%

The Company’s assessment of allowance levels is determined in accordance with GAAP and regulatory guidelines. In determining the allowance, management uses information to stratify the loan portfolio into loan pools with common risk characteristics. Loan pools in the portfolio are assigned estimated allowance amounts of loss based on various factors and analysis. Among the material estimates required to establish the allowance are: loss exposure at default; the amount and timing of future cash flows on impacted loans; value of collateral; and determination of loss factors to be applied to the various elements of the portfolio. All of these estimates are susceptible to significant change. Management reviews the level of allowance at least quarterly and establishes the provision for loan losses based upon an evaluation of the portfolio, past loss experience, current economic conditions and other factors related to the collectibility of the loan portfolio. Loans determined to be impaired include non-accrual loans and troubled debt restructurings (“TDRs”). Impaired loans with outstanding balances greater than $100,000 are evaluated individually rather than on a pool basis. The allocated allowance for loan losses attributable to restructured loans included in the table above was $0 and $0 at June 30, 2010 and December 31, 2009, respectively.

Loans deemed to be impaired include TDRs plus any other loans where management has determined that it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. 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 total of impaired loans was approximately $0 at June 30, 2010 and $948 at December 31, 2009. The allowance allocated to impaired loans, excluding TDRs, totaled $0 and $141 at June 30, 2010 and December 31, 2009, respectively. Loans characterized as TDRs totaled $178 at June 30, 2010, compared to $0 at December 31, 2009. The allowance allocated to TDRs, excluding specifically-impaired loans referred to above, totaled $0 at June 30, 2010 and $0 at December 31, 2009. The TDR total of $178 at June 30, 2010 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.

During the second quarter of 2010 the Company granted payment deferrals of 90 days to four commercial and commercial real estate loan customers with a total outstanding balance of $1.6 million. These deferrals were offered by the Company to the borrowers to assist them in recovering from the effects of severe local flooding that occurred in the Clarksville area in early May 2010. There was no reduction of the principal balances, no reduction of the contractual interest rates, no forgiveness of accrued interest and, the maturities of the loans were not extended. All of the borrowers were conforming to the terms of their original loan agreements at the time the payment deferrals were granted. The allowance for loan losses related to these loans was not affected by the payment deferrals.

We note your disclosure that the fair value of loans held for sale is determined based on specific prices committed to be paid for each individual loan. Please revise to disclose whether you record any derivatives related to your commitments to sell loans. If not, please tell us why these commitments do not meet the definition of a derivative. If so, please revise your future filings to disclose the methodology for determining the fair value of such amounts and provide the relevant disclosures pursuant to ASC 810-10-50.

The Bank enters into interest rate lock commitments, which are commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. Accordingly, such commitments are recorded at estimated fair value with changes in fair value recorded in “Net gains on sales of loans held for sale” on the Consolidated Statements of Operations and do not qualify for hedge accounting. The Bank also has corresponding forward sale commitments related to these interest rate locks commitments, which are recorded at fair market value with changes in fair value recorded in “Net gains on sales of loans held for sale” on the Consolidated Statements of Operations and do not qualify for hedge accounting. See note XX for additional information related to the valuation of interest rate lock and forward sale commitments.

The Bank enters into interest rate lock commitments, which are commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. At December 31, 2009, the Bank had $3.7 million in total notional amount of interest rate lock commitments, with a fair value of $20. The Bank manages market risk on the interest rate lock commitments and mortgage loans held for sale with corresponding forward sale commitments, which are recorded at fair value with changes to fair value recorded in net gains on sales of loans held for sale. At December 31, 2009, the Bank had $6.0 million in total notional amount related to these forward sale commitments, with a fair value of ($20). Changes in fair value are recorded in other assets or other liabilities on the balance sheet, depending on their balance. The adjustment to net gains on mortgage loans held for sale as a result of interest rate lock commitments and forward sale commitments at December 31, 2009 was $0.

Please be advised that the Company will include the requested information in future filings. In the Form 10-Q for the quarter ended June 30, 2010 we would have replaced “NOTE 4 – ACTIVITY IN ALLOWANCE FOR LOAN LOSSES” with “NOTE 4 – LOANS,” which would have included the following tables and discussion. Note that this section is repeated as part of the full proposed NOTE 4 as presented in response to comment number 12 below.

There were no impaired loans at June 30, 2010. Impaired loans totaled $948 at December 31, 2009 and primarily consisted of one-to-four family residential loans. Interest of $0 and $21 was recognized on average impaired loans of $457 and $951 for the six months ended June 30, 2010 and the year ended December 31, 2009, respectively. No interest was recognized on impaired loans on a cash basis during the six months ended June 30, 2010 and the year ended December 31, 2009, respectively. The allocated allowance for loan losses attributable to impaired loans totaled $0 and $141 for the six months ended June 30, 2010 and the year ended December 31, 2009, respectively.

	At June 30,								At December 31,
	2010								2009
						% 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
			($ in thousands)								($ in thousands)
One-to-four family	$	280		9.4	%		19.2	%	$	280		10.0	%		20.8	%
Multi-family and nonresidential		1,117		37.4			39.1			1,125		40.0			36.8
Construction		160		5.4			13.5			160		5.7			12.2
Land		335		11.2			8.8			286		10.2			9.7
Consumer		200		6.7			9.1			200		7.1			9.3
Commercial		893		29.9			10.3			762		27.1			11.2
Total allowance for loan losses	$	2,985		100.0	%		100.0	%	$	2,813		100.0	%		100.0	%

						Nonqualified
						Deferred
				Stock	Option	Compensation	All Other
Name and		Salary	Bonus	Awards	Awards	Earnings	Compensation	Total
Principal Position	Year	($)	($) (1)	($) (2)	($) (3)	($) (4)	($) (5)	($)
Earl O. Bradley, III	2009	$ 195,261	$ -	$ -	$ -	$ -	$ 41,483	$ 236,744
Chief Executive Officer	2008	190,499	47,625	284,692	161,692	-	35,825	720,333

Patrick C. Greenwell	2009	184,413	23,974	-	-	-	40,592	248,979
Chief Financial Officer	2008	179,915	28,786	284,692	161,692	-	34,523	689,608

John T. Halliburton	2009	162,717	22,374	-	-	-	36,301	221,392
President	2008	158,749	34,925	284,692	161,692	-	31,743	671,801

(2)

Reflects the value of restricted stock awards granted to our executive officers under the 2008 Equity Incentive Plan on August 11, 2008 based on the grant date fair value of restricted stock awards in accordance with stock-based compensation accounting rules (FASB ASC Topic 718), disregarding any impact of assumed forfeiture rates. See note 16 of our consolidated financial statements for the year ended December 31, 2009, filed on Form 10-K dated March 4, 2010, for assumptions made in valuation.

(3)

Reflects the value of stock option awards granted to our executive officers under our 2008 Equity Incentive Plan on August 11, 2008 based on the grant date fair value of stock option awards in accordance with stock-based compensation accounting rules (FASB ASC Topic 718), disregarding any impact of assumed forfeiture rates. See note 16 of our consolidated financial statements for the year ended December 31, 2009, filed on Form 10-K dated March 4, 2010, for assumptions made in valuation.

(4)

The Company has a Nonqualified Deferred Compensation Plan under which executives directed that their deferred compensation be invested in First Advantage Bancorp stock, which is held in a trust established by the Bank. Amounts deferred earned interest until stock was actually purchased. Dividends are paid on First Advantage Bancorp stock which is held in trust for each individual and are used to purchase additional shares of Company stock. No above-market or preferential earnings were paid on nonqualified compensation during 2009.

11.

We note that your certifications included as Exhibits 31.1 and 31.2 to the Form 10-K and Form 10-Q/A contain modifications of the exact form of certification as set forth in Item 601(b)(31) of Regulation S-K. In particular, the certifications omit language from Item 4 whereby you certify that you have responsibility for establishing and maintaining internal control over financial reporting. Please file amended certifications and in all future filings the certifications are in the exact form as set forth in Item 601(b)(31) of Regulation S-K, except as otherwise indicated in Commission statements or staff interpretations.

Please be advised that the Company will file amended certifications for the fiscal year ended December 31, 2009 under cover of Form 10-K/A and Form 10-Q/A for the quarter ended March 31, 2010 – Exhibits 31.1 and 31.2. Furthermore, such certifications in all future filings will be in the exact form as set forth in Item 601(b)(31) of Regulation S-K, except as otherwise indicated in Commission statements or staff interpretations.

12.

Please revise future filings to disclose the information required by Items III and IV of Industry Guide 3. Please also revise to present the credit quality measures discussed in your Form 10-K including, but not limited to, non-performing loans and allowance to non-performing loans. Alternatively, please disclose why you believe such disclosures are not meaningful to an investor’s understanding of material trends in your loan portfolio and related credit losses.

	At June 30,						At December 31,
	2010						2009
	Amount			Percent			Amount			Percent
	(Dollars in thousands)						(Dollars in thousands)
Real estate loans:
Permanent loans:
One-to-four family	$	43,902			19.1	%	$	44,582			20.8	%
Multi-family		15,506			6.8			13,695			6.4
Nonresidential		74,223			32.3			63,910			29.9
Construction loans:
One-to-four family		17,105			7.5			13,880			6.5
Multi-family		628			0.3			3,060			1.4
Nonresidential		13,234			5.8			9,941			4.6
Land loans		20,131			8.8			20,849			9.7
Total real estate loans		184,729			80.6			169,917			79.3

Consumer:
Home equity loans and lines of credit		17,592			7.7			16,445			7.7
Auto loans		740			0.3			850			0.4
Deposit loans		276			0.1			257			0.1
Other		2,235			1.0			2,339			1.1
Total consumer loans		20,843			9.1			19,891			9.3

Commercial loans		23,531			10.3			24,069			11.3

Total loans		229,103			100.0	%		213,877			100.0	%
Allowance for loan losses		(2,985	)					(2,813	)
Net deferred loan costs		71						73
Loans receivable, net	$	226,189					$	211,137

The following table sets forth certain information at June 30, 2010 and December 31, 2009 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 June 30, 2010

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

Amounts due in:
One year or less	$	9,963	$	17,026	$	27,758	$	7,891	$	13,569	$	6,782	$	82,989
More than one year to three years		12,826		44,468		1,298		9,496		2,256		8,700		79,044
More than three years to five years		5,469		25,656		1,911		2,525		1,694		3,473		40,728
More than five years to fifteen years		6,330		2,457		-		220		3,446		4,575		17,028
More than fifteen years		9,314		-		-		-		-		-		9,314
Total	$	43,902	$	89,607	$	30,967	$	20,132	$	20,965	$	23,530	$	229,103

	At December 31, 2009

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

Amounts due in:
One year or less	$	9,913	$	16,304	$	24,138	$	9,244	$	13,399	$	7,298	$	80,297
More than one year to three years		10,867		15,928		1,246		9,441		2,278		7,219		46,979
More than three years to five years		6,784		38,444		1,496		1,861		1,794		4,603		54,983
More than five years to fifteen years		7,553		6,850		-		303		2,499		4,948		22,153
More than fifteen years		9,465		-		-		-		-		-		9,465
Total	$	44,582	$	77,526	$	26,881	$	20,849	$	19,971	$	24,069	$	213,877

The following table sets forth the dollar amount of all loans at June 30, 2010 that are due after June 30, 2011, and have either fixed interest rates or floating or adjustable interest rates.

We consider repossessed assets and loans that are typically 90 days or more past due to be nonperforming assets. Typically, loans are placed on nonaccrual status when they become 90 days delinquent at which time the accrual of interest ceases and the allowance for an uncollectible accrued interest is established and charged against operations. Typically, payments received on a nonaccrual loan are first applied to the outstanding principal balance. Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned until it is sold. When property is acquired it is recorded at fair market value at the date of foreclosure. Holding costs and declines in fair value after acquisition of the property result in charges against income. Interest accrued and unpaid at the time a loan is placed on nonaccrual status is charged against interest income. Subsequent interest payments are applied to the outstanding principal balance.

Non-performing Assets	At June 30,			At December 31,
	2010			2009
	(Dollars in thousands)

Non-accrual loans:
One- to four-family	$	1,495		$	888
Multi-family and nonresidential		807			-
Construction		-			-
Land		292			-
Consumer		7			8
Multi-family and nonresidential		-			432
Consumer		301			57
Commercial		13			18
Total		2,915			1,403

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		2,915			1,403
More past due loans

Real estate owned		624			301
Other non-performing assets		-			-
Total non-performing assets	$	3,539		$	1,704

Total non-performing loans to total loans		1.27	%		0.66	%
Total non-performing loans to total assets		0.84	%		0.41	%
Total non-performing assets to total assets		1.03	%		0.50	%

Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations, which typically occurs when principal and interest payments are 90 days past due. At June 30, 2010 and December 31, 2009, non-accruing loans were $2,915 and $1,403, 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 $35 in 2010 and $20 in 2009. No interest income was recognized on non-accrual loans on a cash basis during the first two quarters of 2010 or during 2009.

	At June 30,								At December 31,
	2010								2009
						% 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
	($ in thousands)								($ in thousands)
One-to-four family	$	280		9.4	%		19.2	%	$	280		10.0	%		20.8	%
Multi-family and nonresidential		1,117		37.4			39.1			1,125		40.0			36.8
Construction		160		5.4			13.5			160		5.7			12.2
Land		335		11.2			8.8			286		10.2			9.7
Consumer		200		6.7			9.1			200		7.1			9.3
Commercial		893		29.9			10.3			762		27.1			11.2
Total allowance for loan losses	$	2,985		100.0	%		100.0	%	$	2,813		100.0	%		100.0	%

	Six Months Ended			Year Ended
	June 30,			December 31,
	2010			2009
	(In thousands)
Allowance for loan losses at beginning of period	$	2,813		$	2,175
Provision (Credit) for loan losses		459			868
Charge offs:
One-to-four family		283			44
Multi-family and nonresidential		-			-
Construction		-			-
Land		-			-
Consumer		9			68
Commercial		8			150
Total charge-offs		300			262
Recoveries:
One-to-four family		4			-
Multi-family and nonresidential		-			-
Construction		-			-
Land		-			-
Consumer		3			13
Commercial		6			19
Total recoveries		13			32
Net charge-offs		287			230
Allowance for loan losses at end of period	$	2,985		$	2,813
Allowance for loan losses to nonperforming loans		102.40	%		200.50	%
Allowance for loan losses to total loans outstanding at the end of the period		1.30	%		1.31	%
Net charge-offs to average loans outstanding during the year		0.13	%		0.12	%

Federal regulations require us to review and classify our assets on a regular basis. In addition, the Office of Thrift Supervision has the authority to identify problem assets and, if appropriate, require them to be classified. There are three classifications for problem assets: substandard, doubtful and loss. “Substandard assets” must have one or more defined weaknesses and are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. “Doubtful assets” have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified “loss” is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. The regulations also provide for a “special mention” category, described as assets which do not currently expose us to a sufficient degree of risk to warrant classification but do possess credit deficiencies or potential weaknesses deserving our close attention. When we classify an asset as substandard or doubtful we may establish a specific allowance for loan losses. If we classify an asset as loss, we charge off an amount equal to 100% of the portion of the asset classified loss.

	Mr. Bradley		Mr. Greenwell		Mr. Halliburton
Employer contributions to 401(k) plan	$	7,444	$	6,554	$	6,087
ESOP allocation		15,718		15,718		15,718
Dividends - 2008 Executive Incentive Plan		5,252		5,252		5,252

As of 6/30/2010			Floating or
	Fixed Rates		Adjustable Rates		Total
	(Dollars in thousands)
One-to-four family	$	32,386	$	1,553	$	33,939
Multi-family and nonresidential		61,543		11,039		72,582
Construction		2,708		501		3,209
Land		1,434		10,807		12,241
Consumer		4,924		2,473		7,397
Commercial		11,655		5,092		16,747
Total	$	114,650	$	31,465	$	146,115

As of 12/31/2009			Floating or
	Fixed Rates		Adjustable Rates		Total
	(Dollars in thousands)
One-to-four family	$	33,102	$	1,567	$	34,669
Multi-family and nonresidential		52,510		8,712		61,222
Construction		1,496		1,246		2,742
Land		1,811		9,793		11,604
Consumer		5,404		1,168		6,572
Commercial		11,583		5,187		16,770
Total	$	105,906	$	27,673	$	133,579

	June 30, 2010		December 31, 2008
Impaired loans with an allocated allowance for loan losses	$	-	$	948
Impaired loans without an allocated allowance for loan losses		-		-
Total impaired loans	$	-	$	948

Allocated allowance on impaired loans	$	-	$	141