fabk_10q209.htm

10-Q 1 fabk_10q209.htm FABK 2ND QTR 2009 fabk_10q209.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 June 30, 2009

[ ] 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 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 definition 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 August 11, 2009 was 5,191,133.

FIRST ADVANTAGE BANCORP

Table of Contents

		Page
	Part I. Financial Information

Item 1.	Condensed Consolidated Balance Sheets as of June 30, 2009 (unaudited) and December 31, 2008	1
	Unaudited - Condensed Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2009 and 2008	2
	Unaudited - Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Six Months Ended June 30, 2009 and 2008	3
	Unaudited - Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4T.	Controls and Procedures	26

	Part II. Other Information

Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Submission of Matters to a Vote of Security Holders	27
Item 5.	Other Information	28
Item 6.	Exhibits	28

	SIGNATURES	29

First Advantage Bancorp
Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
	June 30,			December 31,
	2009			2008
	(Unaudited)
Assets
Cash and due from banks	$	9,696		$	7,991
Interest-bearing demand deposits at other banks		7,279			2,151
Time deposits at other banks		-			2,092
Federal funds sold		4,075			9
Cash and cash equivalents		21,050			12,243

Available-for-sale securities, at fair value		117,221			129,076
Loans held for sale		5,816			866
Loans, net of allowance for loan losses of $2,481 and $2,175 at June 30, 2009 and December 31, 2008, respectively		186,269			176,412
Premises and equipment, net		8,458			8,186
Foreclosed assets held for sale		60			-
Other assets held for sale		192			-
Federal Home Loan Bank stock		2,988			2,988
Accrued interest receivable		1,441			1,702
Income taxes receivable		324			709
Deferred tax asset		5,431			5,238
Other assets		1,035			984
Total assets	$	350,285		$	338,404

Liabilities and Shareholders' Equity

Liabilities
Deposits
Demand	$	18,463		$	15,493
Savings, checking and money market		97,711			82,163
Time certificates		92,034			89,151
Total deposits		208,208			186,807

Securities sold under agreement to repurchase		6,794			5,047
Federal Home Loan Bank advances		28,000			38,550
Borrowings with other banks		35,000			35,000
Interest payable and other liablilities		2,529			2,739
Total liabilities		280,531			268,143
Commitments and contingencies		-			-

Shareholders' Equity
Preferred stock, $0.01 par value, 10,000,000 shares authorized no shares outstanding at June 30, 2009 or December 31, 2008		-			-
Common stock, $0.01 par value 50,000,000 shares authorized, 5,199,333 shares issued and 4,409,412 and 4,541,514 outstanding at June 30, 2009 and December 31, 2008, respectively		52			53
Additional paid in capital		52,056			52,221
Common stock acquired by benefit plan:
Restricted stock		(1,359	)		(1,043	)
Unallocated common stock held by:
Employee Stock Ownership Plan trust		(3,642	)		(3,778	)
Benefit plans		(2,660	)		(2,923	)
Retained earnings		23,786			23,909
Accumulated other comprehensive income		1,521			1,822
Total shareholders' equity		69,754			70,261
Total liabilities and shareholders' equity	$	350,285		$	338,404

See accompanying notes to unaudited condensed consolidated financial statements.

First Advantage Bancorp
Condensed Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2009		2008			2009			2008
Interest and Dividend Income
Loans	$	2,749	$	2,218		$	5,353		$	4,209
Investment securities		1,397		2,072			3,013			3,797
Other		66		91			136			215
Total interest and dividend income		4,212		4,381			8,502			8,221
Interest Expense
Deposits		1,178		1,095			2,397			2,367
Securities sold under agreements to repurchase and other short-term borrowings		25		39			62			73
Federal Home Loan Bank advances		101		244			210			375
Borrowings with other banks		325		221			650			221
Total interest expense		1,629		1,599			3,319			3,036
Net Interest Income		2,583		2,782			5,183			5,185
Provision for Loan Losses		159		80			327			357
Net Interest Income After Provision for Loan Losses		2,424		2,702			4,856			4,828
Noninterest Income
Customer service and other fees		297		314			577			577
Loan servicing and other fees		15		12			31			21
Net gains on mortgage loan sales		419		147			698			327
Net realized gain on sales of available-for-sale securities		5		3			5			36
Net realized gain on sales of other assets held-for-sale		-		12			-			295
Commissions on insurance and brokerage		33		72			62			150
Net loss on premises and equipment		-		(21	)		(1	)		(37	)
Other		8		14			13			21
Total noninterest income		777		553			1,385			1,390
Noninterest Expense
Salaries and employee benefits		1,523		1,457			2,992			2,945
Net occupancy expense		199		110			338			240
Equipment expense		170		146			320			288
Data processing fees		241		187			484			381
Professional fees		66		119			232			325
Marketing expense		110		87			164			133
Office expense		65		63			146			141
Losses on foreclosed assets, net		7		-			8			3
Insurance expense		19		19			40			44
Mortgage loan outsourced servicing		9		8			18			26
Other		562		317			1,034			539
Total noninterest expense		2,971		2,513			5,776			5,065
Income Before Income Taxes		230		742			465			1,153
Provision for Income Taxes		89		193			155			15
Net Income	$	141	$	549		$	310		$	1,138
Per common share:
Basic net income per common share	$	0.03	$	0.11		$	0.07		$	0.24
Diluted net income per common share	$	0.03	$	0.11		$	0.07		$	0.23
Basic weighted average common shares outstanding		4,520,674		4,774,267			4,531,018			4,768,323
Diluted weighted average common shares outstanding		4,577,458		4,871,511			4,591,225			4,868,908

See accompanying notes to unaudited condensed consolidated financial statements.

First Advantage Bancorp
Unaudited - Condensed Consolidated Statements of Changes in Stockholders' Equity
Six Months Ended June 30, 2009 and 2008
(Dollars in thousands)
													Common			Accumulated
							Additional						Stock			Other			Total
	Comprehensive			Common			Paid-in			Retained			Acquired by			Comprehensive			Stockholders'
	Income (Loss)			Stock			Capital			Earnings			Benefit Plans			Income			Equity
Balance at January 1, 2008				$	53		$	51,596		$	32,230		$	(5,512	)	$	1,138		$	79,505
Comprehensive income:
Net Income	$	1,138			-			-			1,138			-			-			1,138
Other comprehensive loss, unrealized loss on securities, net of reclassification adjustments, net of tax		(3,227	)		-						-			-			(3,227	)
Total comprehensive income	$	(2,089	)		-			-			-			-			-			(2,089	)
Release of Employee Stock Ownership Plan (ESOP) shares					-			17			-			104			-			121
Purchase and Release of Restricted stock plan shares, net					-			176			-			(42	)		-			134
Balance at June 30, 2008				$	53		$	51,789		$	33,368		$	(5,450	)	$	(2,089	)	$	78,809

Balance at January 1, 2009				$	53		$	52,221		$	23,909		$	(7,744	)	$	1,822		$	70,261
Cumulative effect of change in accounting principle,
adoption of FSP 115-2 and 124-2					-			-			22			-			(22	)		-
Comprehensive income:
Net income	$	310			-			-			310			-			-			310
Other comprehensive loss, unrealized loss on securities
net of reclassification adjustment, net of tax		(279	)		-			-			-			-			(279	)		(279	)
Total comprehensive income	$	31			-			-			-			-			-
Treasury stock purchase/retire					(1	)		(618	)											(619	)
Dividends paid ($0.05 per common share)					-			-			(455	)		-			-			(455	)
Release of Employee Stock Ownership Plan (ESOP) shares					-			(45	)		-			136			-			91
Purchase and release of restricted stock plan shares, net					-			498			-			(53	)		-			445
Balance at June 30, 2009				$	52		$	52,056		$	23,786		$	(7,661	)	$	1,521		$	69,754

First Advantage Bancorp
Unaudited - Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
	Six Months Ended
	June 30,
	2009			2008
Operating Activities
Net income	$	310		$	1,138
Adjustment to reconcile net income to net cash (used in) provided by operating activities
Depreciation and amortization		275			232
Provision for loan losses		327			357
Decrease in provision for uncertain tax positions		39			251
Amortization of unearned compensation for restricted stock		498			176
Amortization (accretion) of premiums and discounts on securities		241			(114	)
Amortization of loan-servicing rights		-			9
Deferred income taxes		(5	)		46
ESOP plan expense		91			121
Net realized gain on available-for-sale securities		(5	)		(36	)
Federal Home Loan stock dividends		-			(76	)
Loss on disposal of premises and equipment		1			37
Originations of loans held for sale		(33,269	)		(16,554	)
Proceeds from loans sold		28,319			16,141
Net gain on assets held for sale		-			(295	)
Changes in
Interest receivable and other assets		210			(875	)
Interest payable and other liabilities		135			(199	)
Net cash (used in) provided by operating activities		(2,833	)		359
Investing Activities
Purchases of available-for-sale securities		(24,071	)		(67,970	)
Proceeds from maturities of and repayments of available-for-sale securities		35,223			14,435
Proceeds from sales of available-for-sale securities		-			9,900
Net change in loans		(10,244	)		(37,672	)
Purchase of premises and equipment		(739	)		(100	)
Purchase of other assets held for sale		-			(159	)
Proceeds from sale of other assets		-			835
Net cash provided by (used in) investing activities		169			(80,731	)
Financing Activities
Net increase in demand deposits, money market, checking and savings accounts		18,518			610
Net increase (decrease) in certificates of deposit		2,883			(4,749	)
Net change in repurchase agreement and other short-term borrowings		1,747			3,882
Net change Federal Home Loan Bank advances - short term		(10,550	)		30,614
Proceeds from Federal Home Loan Bank advances - long term		-			13,000
Proceeds from long term borrowings at other banks		-			35,000
Stock purchased - repurchase program		(619	)		-
Dividends paid		(455	)		-
Stock purchased - restricted stock compensation plans		(53	)		(42	)
Net cash provided by financing activities		11,471			78,315
Increase (decrease) in Cash and Cash Equivalents		8,807			(2,057	)
Cash and Cash Equivalents, Beginning of Period		12,243			9,076
Cash and Cash Equivalents, End of Period	$	21,050		$	7,019
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”) the holding company for First Federal Savings Bank (“First Federal” or the “Bank”), the Bank and its wholly-owned subsidiary, First Financial Mortgage Corporation. First Federal is a federally chartered savings bank originally founded in 1953 and is headquartered in Clarksville, Tennessee. 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 the reporting of interim periods have been included. The results of operations for the six months ended June 30, 2009 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, 2008 filed with the United States Securities and Exchange Commission (the “SEC”) on March 25, 2009.

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 – RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2008, the FASB issued Staff Position No. 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“Staff Position 132(R)-1”). Staff Position 132(R)-1 amends SFAS No. 132(R), “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” to require further disclosures about the fair value measurements of an employers’ plan assets including how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies; major categories of plan assets; information about inputs and valuation techniques, including the fair value hierarchy classifications, as defined by SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), of the major categories of plan assets; the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets; and significant concentrations of risk within plan assets. Staff Position 132(R)-1 is effective for fiscal years beginning on or after December 15, 2009, with early adoption permitted. The Company is currently in the process of evaluating the impact of adopting Staff Position 132(R)-1 on its consolidated financial statements.

In January 2009, the FASB issued Staff Position No. Emerging Issues Task Force (“EITF”) 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20” (“EITF 99-20-1”), which amends the impairment guidance in EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets," to achieve more consistent determination of whether an other-than-temporary impairment has occurred. EITF 99-20-1 also retains and emphasizes the objective of an other-than-temporary impairment (“OTTI”) assessment and the related disclosure requirements in SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and other related guidance. EITF 99-20-1 was effective for interim and annual reporting periods ending after December 15, 2008, and was to be applied prospectively. Retroactive application was not permitted. The Company adopted EITF 99-20-1 on December 31, 2008. The adoption of EITF 99-20-1 did not have a material impact on the Company.

In April 2009, the FASB issued Staff Position No. 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies” (“FSP FAS 141(R)-1”). This Staff Position amends and clarifies Statement No. 141, “Business Combinations,” to address the initial recognition and measurement of an asset acquired or a liability assumed in a business combination that arises from a contingency provided the asset or liability's fair value on the date of acquisition can be determined. When the fair value, at the acquisition date, of an asset acquired or liability assumed cannot be determined, FSP FAS 141(R)-1 requires using the guidance under Statement No. 5, “Accounting for Contingencies,” and Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss.” FSP FAS 141(R)-1 is effective for assets or liabilities arising from contingencies in business combinations that occur following the start of the first annual reporting period beginning on or after December 15, 2008. The adoption of FSP FAS 141(R)-1 will impact the Company’s accounting for and reporting of acquisitions completed after January 1, 2009.

In April 2009, the FASB issued Staff Position No. 107-1 and Accounting Principles Board (“APB”) Opinion No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“Staff Position 107-1 and APB 28-1”). Staff Position 107-1 and APB 28-1 amends SFAS No 107, “Disclosures about Fair Value of Financial Instruments,” and APB Opinion No. 28, “Interim Financial Reporting,” to require quantitative and qualitative disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual reporting periods. Staff Position 107-1 and APB 28-1 is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted. The adoption of Staff Position No. 107-1 and APB Opinion No. 28-1 did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued Staff Position No. 115-2 and Staff Position No. 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“Staff Position 115-2 and 124-2”). Staff Position 115-2 and 124-2 amends FASB Staff Position No. 115-1 and Staff Position No. 124-1, “The Meaning of Other-Than Temporary Impairment and Its Application to Certain Investments.” Staff Position 115-2 and 124-2 is intended to bring greater consistency to the timing of impairment recognition, and provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. The measure of impairment in comprehensive income remains fair value. The FSP also requires increased and more frequent disclosures sought by investors regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. Staff Position 115-2 and 124-2 is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted. The adoption of Staff Position 115-2 and 124-2 did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued Staff Position No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“Staff Position 157-4”). FSP FAS 157-4 relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. It reaffirms what SFAS No. 157 states is the objective of fair value measurement-to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions. Specifically, it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. Staff Position 157-4 is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted. The adoption of Staff Position 157-4 did not have a material impact on the Company’s consolidated financial statements.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events.” SFAS No. 165 established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. SFAS No. 165 defines (i) the period after the balance sheet date during which a reporting entity’s management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which the entity should recognize events or transactions occurring after the balance sheet date in its financial statements and (iii) the disclosures an entity should make about events or transactions that occurred after the balance sheet date. SFAS No. 165 became effective for periods ending after June 15, 2009 and did not have a material impact on the Company’s consolidated financial statements. In connection with the preparation of the interim financial statements included in this Form 10-Q, the Company has evaluated events and transactions through August 11, 2009, which is the date on which such interim financial statements were issued.

In June 2009, the FASB issued Statement No. 168, “The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162.” Under the Statement, The FASB Accounting Standards Codification (Codification) will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. In the FASB’s view, the issuance of this Statement and the Codification will not change GAAP, except for those nonpublic nongovernmental entities that must now apply the American Institute of Certified Public Accountants Technical Inquiry Service Section 5100, “Revenue Recognition,” paragraphs 38–76. The Company does not expect that the adoption of this Statement will have a material impact on the Company’s consolidated 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. At June 30, 2009, there were 517,337 antidilutive common stock equivalents. The weighted average common shares outstanding equals the gross number of common shares issued less unallocated shares held by the First Federal Savings Bank Employee Stock Ownership Plan (“ESOP”), nonvested restricted stock awards under the Company’s 2007 Deferred Compensation Plan and nonvested restricted stock awards under the Company’s 2008 Equity Incentive Plan. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares to be issued include any restricted shares authorized under the Company’s 2007 Deferred Compensation Plan and the 2008 Equity Incentive Plan. Unallocated common shares held by the ESOP are shown as a reduction in stockholders’ equity and are included in the weighted-average number of common shares outstanding for diluted EPS calculations as they are committed to be released.

Basic and diluted earnings per share are computed as follows:

(Unaudited - Dollars in thousands, except per share amounts)	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008

Net income	$	141	$	549	$	310	$	1,138

Weighted-average shares - Basic EPS		4,520,674		4,774,267		4,531,018		4,768,323
Weighted-average restricted shares -
2007 Deferred Compensation Plan		27,458		97,244		28,853		100,585
2008 Equity Incentive Plan		5,929				8,588
Weighted-average shares -
ESOP committed to be released - diluted EPS		23,397				22,766
Weighted-average shares - Diluted EPS		4,577,458		4,871,511		4,591,225		4,868,908
Basic earnings per common share	$	0.03	$	0.11	$	0.07	$	0.24
Diluted earnings per common share	$	0.03	$	0.11	$	0.07	$	0.23

NOTE 4 – ACTIVITY IN ALLOWANCE FOR LOAN LOSSES

The following table summarizes the activity in the allowance for loan losses for the periods indicated:

(Unaudited - Dollars in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008

Balance, beginning of period	$	2,329		$	1,787		$	2,175		$	1,510
Provision charged to expense		159			80			327			357
Charge-offs		(11	)		(18	)		(30	)		(27	)
Recoveries		4			11			9			20
Balance, end of period	$	2,481		$	1,860		$	2,481		$	1,860

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 June 30, 2009.

June 30, 2009
(Unaudited - Dollars in thousands)
			Gross		Gross			Approximate
	Amortized		Unrealized		Unrealized			Fair
Available-for-sale	Cost		Gains		Losses			Value
U. S. Treasury	$	4,782	$	1,379	$	-		$	6,161
U. S. Government agencies and corporations		16,531		228		(68	)		16,691
Federal Family Education Loan Program (FFELP) loan-backed security		3,525		224		-			3,749
Mortgage-backed securities		73,122		1,832		-			74,954
Collateralized mortgage obligations		1,612		37		-			1,649
State and political subdivisions		14,093		24		(216	)		13,901
Trust preferred securities (1)		1,092		-		(976	)		116
Total	$	114,757	$	3,724	$	(1,260	)	$	117,221

(1)

During the quarter ended June 30, 2009, pursuant to FSP FAS 115-2, which states that previously recorded impairment charges which did not relate to credit losses should be reclassified from retained earnings to accumulated other comprehensive income, the Company recorded a cumulative effect adjustment that increased retained earnings and decreased other comprehensive income by $36,000 or $22,000, net of tax.

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 June 30, 2009.


(Unaudited - Dollars in thousands)	June 30, 2009
	Less Than 12 months					12 months or more					Total
	Approximate		Gross			Approximate		Gross			Approximate		Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Available-for-sale	Value		Losses			Value		Losses			Value		Losses
U. S. Government agencies and corporations:	$	6,962	$	(68	)	$	-	$	-		$	6,962	$	(68	)
State and political subdivisions		4,488		(85	)		975		(131	)		5,463		(216	)
Trust preferred securities		-		-			116		(976	)		116		(976	)
Total	$	11,450	$	(153	)	$	1,091	$	(1,107	)	$	12,541	$	(1,260	)

Based on an evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for the Company’s U.S. Government agencies and corporations and state and political subdivisions investments are temporary.

For the year ended December 31, 2008, the Company recorded OTTI on trust preferred securities (TRUPS), which resulted in a reduction of non-interest income of $3.8 million. Pursuant to FSP FAS 115-2/124-2, which states that previously recorded impairment charges which did not relate to a credit loss should be reclassified from retained earnings to other comprehensive income, the Company recorded a cumulative effect adjustment that increased retained earnings and decreased other comprehensive income by $36,000, or $22,000, net of tax.

The Company engaged an independent consulting firm to assist in the valuation of this security as of June 30, 2009. Based on the consulting firm’s findings, management determined the security had an estimated market value of $116,000 which resulted in no impairment in the second quarter of 2009. To determine the credit loss on this security, the investment consulting firm projected cash flows for the security and discounted the cash flows at the original purchased yield. The consulting firm analyzed each underlying bank or insurance company and assigned a probability of default. Those default assumptions were then used to determine the projected cash flows of the security. In addition, the consulting firm assumed no prepayments of the underlying debt. If the net present value of the cash flows was less than the cost basis of the security, the difference was considered credit-related and recorded through earnings. Based on this calculation, the Company had no additional impairment considered to be a credit loss which was recognized in the 2009 second quarter income statement. The remaining change in fair market value of $69,000 is reflected in other comprehensive income, net of taxes of $26,000. The Company will continue to estimate the present value of cash flows expected to be collected over the life of the security.

NOTE 6 –FAIR VALUE

SFAS No. 157 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. 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:

Securities Available for Sale

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.

Assets Measured on a Recurring Basis

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


(Dollars in thousands)	June 30, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Available for sale securities	$	117,221		--	$	117,105	$	116

(Dollars in thousands)
Balance, January 1, 2009	$	1,092
Unrealized losses included in other comprehensive income		(976	)
Balance, June 30, 2009	$	116

Certain assets may be recorded at fair value on a nonrecurring basis. These nonrecurring fair value adjustments typically are a result of the application of lower of cost or market accounting or a write-down occurring during the period. As of June 30, 2009, the Company did not have any nonrecurring fair value adjustments recorded. 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:

Loans Held For Sale

Loans held for sale are carried at the lower of cost or market value and represent loans that are awaiting delivery to a specific committed buyer. The fair value of loans held for sale is based on specific prices committed to be paid for each individual loan. As such the Company classifies loans held for sale subject to fair value adjustments as Level 2.

Other Real Estate Owned

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

Assets and liabilities measured at fair value on a non-recurring basis at June 30, 2009, are summarized below:

			Fair Value Measurements at June 30, 2009 Using
(Dollars in thousands)	June 30, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Other real estate owned	$	60		--		--	$	60
Loans held for sale	$	5,816		--	$	5,816		--

SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” 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, accrued interest and the cash surrender value of life insurance policies. The methodologies for other financial assets and financial liabilities are discussed below:

Cash and Cash Equivalents, Interest Receivable and Federal Home Loan Bank Stock

The carrying amount approximates fair value.

Available-for-Sale Securities

Fair values equal quoted market prices, if available. If quoted market prices are not available, fair value is estimated based on quoted market prices of similar securities.

Loans Held for Sale

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. The carrying amount of accrued interest approximates its fair value.

Deposits

Deposits include non-interest bearing checking accounts and interest bearing deposits, including savings accounts, checking accounts and money market deposits. The carrying amount for theses deposits approximates fair value. The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

Securities Sold Under Agreement to Repurchase

The carrying amount approximates fair value because of the short time between the origination of the agreements and their expected realization.

Interest Payable

The carrying amount approximates fair value because of the short time between the origination of the liability and its expected realization.

Federal Home Loan Bank Advances

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

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.

The year-end estimated fair values of financial instruments were as follows:


	June 30, 2009				December 31, 2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

	(In thousands)
Financial assets
Cash and cash equivalents	$	21,050	$	21,050	$	12,243	$	12,243
Available-for-sale securities		117,221		117,221		129,076		129,076
Loans held for sale		5,816		5,816		866		866
Loans, net of allowance for loan losses		186,269		185,836		176,412		178,210
FHLB stock		2,988		2,988		2,988		2,988
Interest receivable		1,441		1,441		1,702		1,702
Forward sale commitments		-		-		-		-

Financial liabilities
Deposits	$	208,208	$	208,756	$	186,807	$	187,394
Securities sold under agreement to repurchase		6,794		6,794		5,047		5,047
Interest payable		581		581		716		716
FHLB advances		28,000		28,361		38,550		39,349
Other borrowings		35,000		35,631		35,000		38,297

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, 2008, as previously filed with the SEC on March 25, 2009.

Forward-Looking Statements.

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

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

General.

The Bank provides commercial and retail banking services, including commercial loans, commercial real estate loans, one-to-four family residential mortgage loans, home equity loans and lines of credit and consumer loans as well as certificates of deposit, checking accounts, money-market accounts and savings accounts within its market area. At June 30, 2009, the Company had total assets of $350.3 million, deposits of $208.2 million and shareholders’ equity of $69.8 million. Unless otherwise indicated, all references to the Company refer collectively to the Company and the Bank.

Application of Critical Accounting Policies.

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

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

Currently, management is closely monitoring 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.

The Company conducts quarterly reviews to identify and evaluate each investment that has an unrealized loss for other-than-temporary impairment (“OTTI”). In June 2009, the Company adopted FSP FAS 115-2/124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” which changed the accounting requirements for OTTI for debt securities, and in certain circumstances, separates the total impairment into credit and noncredit-related amounts. The review takes into consideration current market conditions, issuer rating changes and trends, the credit worthiness of the obligor of the security, current analysts’ evaluations, failure of the issuer to make scheduled interest or principal payments, the Company’s intent to sell the security or whether it is more-likely-than-not that the Company will be required to sell the debt security before its anticipated recovery, as well as other qualitative factors. The term OTTI is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. Declines in the fair value of securities below their amortized cost basis that are deemed to be OTTI are carried at fair value. Any portion of a decline in value associated with a credit loss is recognized in income with the remaining noncredit-related component being recognized in other comprehensive income. A credit loss is determined by assessing whether the amortized cost basis of the security will be recovered, by comparing the present value of cash flows expected to be collected from the security to the amortized cost basis of the security. The shortfall of the present value of the cash flows expected to be collected in relation to the amortized cost basis is considered to be the “credit loss.”

As of June 30, 2009, the Company’s pooled trust preferred securities had an amortized cost of $1.1 million and an estimated market value of $116,000 which resulted in no impairment in the second quarter of 2009. With the assistance of an investment consulting firm, the Company estimated the fair value of the security using a discounted cash flow method. To determine the credit loss on this security, the investment consulting firm projected cash flows for the security and discounted the cash flows at the original purchased yield. Based on this calculation, none of the total impairment was considered to be a credit loss. The remaining change in fair market value of $69,000 is reflected in other comprehensive income, net of taxes of $26,000. On a quarterly basis, the Company will continue to estimate the present value of cash flows expected to be collected over the life of the security.

Comparison of Financial Condition at June 30, 2009 and December 31, 2008

Total Assets. At June 30, 2009, total assets were $350.3 million, an increase of $11.9 million, or 3.5%, compared to $338.4 million at December 31, 2008.

Cash and Cash Equivalents. Cash and cash equivalents were $21.1 million at June 30, 2009 compared to $12.2 million at December 31, 2008. Excess funds from overnight FHLB borrowings contributed to an increase of $5.1 million in interest-bearing demand deposits at other banks to $7.3 million at June 30, 2009 compared to $2.2 million at December 31, 2008, and an increase of $4.1 million in federal funds sold to $4.1 million at June 30, 2009 compared to $9,000 at December 31, 2008.

Investments. Our investment securities portfolio consists primarily of U.S. government and callable federal agency bonds and U.S. government agency mortgage-backed securities and obligations of state and political subdivisions, with a relatively smaller investment in other securities including pooled trust preferred debt issues and Federal Family Education Loans (“FFELP”) collateralized asset-backed securities. Total securities decreased by $11.9 million, or 9.2%, to $117.2 million at June 30, 2009 compared to $129.1 million as of December 31, 2008. The primary reason for the decline was accelerated prepayments on mortgage backed securities and calls of callable agency bonds due to falling interest rates that occurred during the first six months of 2009.

Loans. Net loans increased $9.9 million, or 5.6%, to $186.3 million at June 30, 2009 compared to $176.4 million as of December 31, 2008. The increase in total loans was primarily due to growth in total real estate secured loans to $149.8 million compared to $141.9 million at December 31, 2008. 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.

Loan Loss Allowance. The allowance for loan losses increased by $306,000, or 14.1%, to $2.5 million at June 30, 2009 compared to $2.2 million as of December 31, 2008. Asset quality remained steady throughout the first two quarters of 2009. The quality of the Company’s loan portfolio continues to rely heavily on the resilience of the local real estate market and a significant deterioration in that market or other negative economic conditions could have a negative impact on the Company’s financial condition and results of operations.

Non-performing assets (consisting of non-accrual loans and real estate owned) totaled $868,000 at June 30, 2009 compared to $830,000 at December 31, 2008. The Bank’s management reviews the level of the allowance for loan losses on a regular basis and establishes the provision for loan losses based upon the volume and types of lending, delinquency levels, loss experience, the amount of impaired and classified loans, economic conditions and other relevant factors related to the collectability of the loan portfolio. The provision was increased primarily due to the growth in the loan portfolio and, to a lesser extent, changes in economic conditions and changes in the mix of loans in the Bank’s portfolio.

Deposits. Total deposits increased by $21.4 million, or 11.5%, to $208.2 million at June 30, 2009 compared to $186.8 million as of December 31, 2008. During the first six months of 2009, the Company experienced an increase of $15.5 million in savings, interest checking and money market accounts, certificates of deposits increased $2.9 million and demand deposits increased $3.0 million.

Borrowings. During the first six months of 2009, excess funds of $10.6 million were used to pay-down advances from the Federal Home Loan Bank of Cincinnati (“FHLB”). At June 30, 2009, FHLB advances totaled $28.0 million compared to $38.6 million at December 31, 2008. Additionally, securities sold under agreements to repurchase totaled $6.8 million as of June 30, 2009 compared to $5.0 million as of December 31, 2008. Total borrowings with other banks totaled $35.0 million at both June 30, 2009 and at December 31, 2008.

Shareholders’ Equity. Total shareholders’ equity decreased by $507,000 to $69.8 million as of June 30, 2009, compared to $70.3 million as of December 31, 2008. The decrease in shareholders’ equity was primarily due the Company’s repurchase of 65,350 shares of common stock in the amount of $619,000 pursuant to the Stock Repurchase Program announced in December of 2008.

Comparison of Operating Results for the Three Months Ended June 30, 2009 and 2008

General. Net income for the three months ended June 30, 2009 was $141,000, a decrease of 74.3% compared to net income of $549,000 for the three months ended June 30, 2008. An increase of $224,000 in non-interest income and a decrease of $104,000 in the provision for income taxes were off-set by an increase of $79,000 in provision for loan losses and an increase of $458,000 in non-interest expense.

Net Interest Income. Net interest income decreased $199,000, or 7.2%, to $2.6 million for the three months ended June 30, 2009 compared to the three months ended June 30, 2008. Total interest income decreased by $169,000 or 3.9%, to $4.2 million for the three months ended June 30, 2009 compared to the prior year period. Income on interest-bearing deposits at other banks increased by 11.8% to $57,000 during the three months ended June 30, 2008 as the average outstanding balance increased by $3.2 million, or 96.0%, to $6.4 million during the period, primarily due to utilization of excess funds from overnight borrowings. The yield earned on deposits at other banks declined by 269 basis points because excess funds were invested at low overnight rates in 2009, while a large portion of these funds were invested in certificates of deposit at other banks during the first quarter of 2008.

Interest income on loans increased by 23.9% to $2.7 million as of June 30, 2009 compared to June 30, 2008 as average outstanding loans increased by $36.5 million, or 24.9%, to $182.9 million, while the yield on the portfolio remained virtually unchanged from the same period one year ago.

Interest income on investment securities decreased by $675,000, or 32.6%, to $1.4 million from the same period one year ago as average balances decreased $29.3 million and average yields decreased 91 basis points. The primary reason for the decline in average balances during the period was accelerated prepayments on mortgage backed securities due to falling interest rates. Additionally, calls on higher yielding agency bonds were significant during the period thereby contributing to the decline in average balances and average yields.

Total interest expense increased by $30,000 or 1.9% to $1.6 million for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008. The average balance of interest-bearing deposits increased 22.6% to $188.1 million for the quarter ended June 30, 2009 as compared to the quarter ended June 30, 2008. Interest paid on interest-bearing deposits increased by $83,000, or 7.6%, to $1.2 million for the three month period ended June 30, 2009 as the average interest rate paid declined 36 basis points, primarily as a result of lower interest rates paid due to the Federal Reserve’s actions to continue to lower the target fed funds rate during the second half of 2008. Interest paid on FHLB advances and other borrowings decreased $157,000 or 55.5% while FHLB advances and other borrowings decreased to an average of $28.3 million at June 30, 2009, compared to $45.5 million as of June 30, 2008 and the average interest rate paid declined by 72 basis points, primarily due to the Federal Reserve’s actions to further lower the target fed funds rate in the second half of 2008.

Additionally, the Company’s leverage transaction that was initiated during the second quarter of 2008 added $325,000 of additional interest expense during the three months ended June 30, 2009, compared to $221,000 of additional interest expense for the same period of 2008.

The following table summarizes average balances and average yields and costs for the three months ended June 30, 2009 and 2008.

				Average Balance Sheet for the
				Three Months Ended June 30,
				2009							2008

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

Interest-earning assets:
	Interest-earning deposits at other banks	$	6,431	$	57		3.56	%	$	3,281	$	51		6.25	%
	Loans		182,906		2,749		6.03	%		146,414		2,218		6.09	%
	Investment securities		119,399		1,397		4.69	%		148,704		2,072		5.60	%
	Other interest-earning assets		6,035		9		0.60	%		4,476		40		3.59	%
	Total interest-earning assets		314,771		4,212		5.37	%		302,875		4,381		5.82	%

Noninterest-earning assets			22,592							12,023
Total		$	337,363						$	314,898


LIABILITIES AND SHAREHOLDERS' EQUITY:
	Interest-bearing deposits		188,103		1,178		2.51	%	$	153,434	$	1,095		2.87	%
	FHLB advances and other borrowings		28,327		126		1.78	%		45,477		283		2.50	%
	Long-term borrowings at other banks		35,000		325		3.72	%		23,846		221		3.73	%
Total Interest-Bearing Liabilities			251,430		1,629		2.60	%		222,757		1,599		2.89	%

	Noninterest-bearing deposits		14,675							9,595
	Other noninterest-bearing liabilities		2,328							2,359
	Shareholders' equity		68,930							80,187

Total		$	337,363						$	314,898


Net Interest Income				$	2,583						$	2,782


Net Interest Margin							3.29	%						3.69	%


Interest rate spread							2.77	%						2.93	%

Average interest-earning assets to
	average interest-bearing liabilities						125.19	%						135.97	%

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
	June 30, 2009 Compared to June 30, 2008
	Increase (Decrease) Due To
	Volume			Rate			Net
	(Dollars in thousands)
Interest earned on:
Interest-earning assets:
Interest-earning demand deposits	$	12		$	(6	)	$	6
Loans		615			(84	)		531
Investment securities		295			(970	)		(675	)
Other interest-earning assets		(291	)		260			(31	)
Total Earning Assets		631			(800	)		(169	)

Interest paid on:
Interest bearing deposits		303			(220	)		83
FHLB advances and other borrowings		26			(183	)		(157	)
Long-term borrowings at other banks		328			(3	)		325
Total Interest-Bearing Liabilities		657			(406	)		251
Net Interest Income	$	(26	)	$	(394	)	$	(420	)

Provision for Loan Losses. We recorded a provision for loan losses of $159,000 for the three months ended June 30, 2009 compared to a provision of $80,000 for the three months ended June 30, 2008. The Bank’s management reviews the level of the allowance for loan losses on a regular basis and establishes the provision for loan losses based upon the volume and types of lending, delinquency levels, loss experience, the amount of impaired and classified loans, economic conditions and other relevant factors related to the collectability of the loan portfolio. The provision was higher for the second quarter of 2009 primarily due to changes in economic conditions and in the mix of loans in the Bank’s portfolio and, to a lesser extent, growth in the Bank’s loan portfolio during that quarter.

Non-interest Income. The following table summarizes non-interest income for the three months ended June 30, 2009 and 2008 and the percentage change for each category of income.

	Three Months Ended June 30,
	2009		2008			% Change
			(Dollars in thousands)
Non-interest Income
Customer service and other fees	$	297	$	314			(5.41	) %
Loan servicing and other fees		15		12			25.00	%
Net gains on mortgage loan sales		419		147			185.03	%
Net realized gain on sales of available-for-sale securities		5		3			66.67	%
Net realized gain on sales of other assets-held-for sale		-		12			(100.00	) %
Commissions on insurance and brokerage		33		72			(54.17	) %
Net loss on premises and equipment		-		(21	)		100.00	%
Other		8		14			(42.86	) %
Total noninterest income	$	777	$	553			40.51	%

Non-interest income for the three months ended June 30, 2009 increased $224,000 or 40.5%, to $777,000 for the three months ended June 30, 2009 compared to $553,000 for the three months ended June 30, 2008. The increase in non-interest income was due primarily to secondary market mortgage loan originations which resulted in an increase of $272,000 of net gains on mortgage loan sales.

Non-interest Expense. The following table summarizes non-interest expense for the three months ended June 30, 2009 and 2008 and the percentage change for each expense category.

	Three Months Ended June 30,
	2009		2008		% Change
	(Dollars in thousands)
Non-interest Expense
Salaries and employee benefits	$	1,523	$	1,457		4.53	%
Net occupancy expense		199		110		80.91	%
Equipment expense		170		146		16.44	%
Data processing fees		241		187		28.88	%
Professional fees		66		119		(44.54	) %
Marketing expense		110		87		26.44	%
Office expense		65		63		3.17	%
Losses on foreclosed assets, net		7		-		100.00	%
Insurance expense		19		19		0.00	%
Mortgage loan outsourced servicing		9		8		0.24	%
Other		562		317		77.29	%
Total noninterest expense	$	2,971	$	2,513		18.23	%

Total non-interest expense increased $458,000, or 18.2% to $3.0 million for the three months ended June 30, 2009 as compared to the same period in 2008. Other expense increased by $245,000, or 77.3%, to $562,000 for the three months ended June 30, 2009, compared to the same period in 2008, which was mainly attributable to higher FDIC insurance premiums due to an industry-wide increase in assessment rates during the first quarter of 2009 and the imposition of a one-time special assessment at June 30, 2009. Expenses for stock awards for directors related to the Company’s 2008 Equity Incentive Plan also contributed to the increase in other expenses.

Higher commissions paid to mortgage originators and expenses resulting from stock awards for employees related to the Company’s 2008 Equity Incentive Plan were the primary factors contributing to an increase of $66,000, or 4.5%, in salaries and employee benefits expense, while lower bonuses and higher deferred loan costs decreased expenses. The addition of a new branch facility and higher property tax and maintenance costs contributed to an increase in occupancy expense of $89,000 or 81.0% for the three months ended June 30, 2009 compared to the three months ended June 30, 2008. During the second quarter of 2009, data processing fees increased $54,000 or 28.9% due to expanded service offerings and increased volume related to our new branch facility and marketing expense increased $23,000 or 26.4% compared to the second quarter of 2008.

Professional fees declined $53,000 or 44.5%, primarily due to lower audit and tax expense resulting from changing our external auditors during the second half of 2008.

Income Taxes. Income tax expense for the three months ended June 30, 2009 was $89,000 compared to $193,000 for the same period in 2008. During the second quarter of 2009 management reduced its FIN 48 tax liability by $39,000. The federal effective income tax ratio (federal income taxes divided by income before taxes) was 38.7% for the second quarter of 2009. The lower income tax expense for the three months ended June 30, 2009 compared to the three months ended June 30, 2008 was primarily due to the decrease in income before taxes, combined with the FIN 48 credit.

Comparison of Operating Results for the Six Months Ended June 30, 2009 and 2008

General. Net income decreased $828,000 to $310,000 for the six months ended June 30, 2009 compared to net income of $1.1 million for the six months ended June 30, 2008, primarily due to increases of $711,000 in non-interest expense and $140,000 in the provision for income taxes.

Net Interest Income. Net interest income was flat for the six months ended June 30, 2009 compared to the six months ended June 30, 2008. Total interest income increased by $281,000 or 3.4%, to $8.5 million for the six months ended June 30, 2009 compared to the prior year period. Income on interest-earning deposits at other banks decreased by 38.7% to $68,000 during the six months ended June 30, 2009, primarily due to investments made during 2008 in higher yielding certificates of deposits at other banks which matured early in 2009.

Interest income on loans increased by 27.2% to $5.4 million as of June 30, 2009 compared to June 30, 2008 as average outstanding loans increased by $44.0 million, or 32.3%, to $180.0 million, while the yield on the portfolio fell by 22 basis points, due primarily to competitive pressures in the market and the lower prime lending rate resulting from the Federal Reserve’s aggressive cuts in the target fed funds rate.

Interest income on investment securities decreased by $784,000, or 20.6%, to $3.0 million as of June 30, 2009 as compared to the same period one year ago as average balances decreased $11.8 million and average yields decreased 72 basis points. The primary reason for the decline in average balances during the period was accelerated prepayments on mortgage backed securities due to falling interest rates. Additionally, calls on higher yielding agency bonds were significant during the period thereby contributing to the decline in average balances and average yields

Total interest expense increased $283,000 or 9.3% to $3.3 million for the six months ended June 30, 2009 as compared to the six months ended June 30, 2008. The average balance of interest-bearing deposits increased 18.5% to $183.5 million as of June 30, 2009 compared to June 30, 2008. Interest paid on interest-bearing deposits increased by $30,000, or 1.3%, to $2.4 million for the six-month period ended June 30, 2009 as the average interest rate paid declined 44 basis points, primarily as a result of lower interest rates paid due to the Federal Reserve’s actions to continue to lower the target fed funds rate during the second half of 2008.

Interest paid on FHLB advances, repurchase agreements and other borrowings decreased $176,000 or 39.3% as these borrowings decreased to an average of $32.5 million at June 30, 2009, compared to $33.8 million for the same period last year. The average interest rate paid on these borrowings declinded by 97 basis points primarily due to lower interest rates driven by reductions in the target fed funds rate during the second half of 2008. Additionally, during the second quarter of 2008, the Bank entered into a balance sheet leverage transaction which increased interest expense by $429,000, to $650,000 for the six months ended June 30, 2009 compared to $221,000 for the six months ended June 30, 2008.

The following table summarizes average balances and average yields and costs for the six months ended June 30, 2009 and 2008.

				Average Balance Sheet for the
				Six Months Ended June 30,
				2009							2008

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

Interest-earning assets:
	Interest-earning deposits at other banks	$	4,726	$	68		2.90	%	$	4,379	$	111		5.10	%
	Loans		180,034		5,353		6.00	%		136,052		4,209		6.22	%
	Investment securities		123,693		3,013		4.91	%		135,526		3,797		5.63	%
	Other interest-earning assets		5,573		68		2.46	%		4,474		104		4.67	%
	Total interest-earning assets		314,026		8,502		5.46	%		280,431		8,221		5.90	%

Noninterest-earning assets			22,954							12,557
Total		$	336,980						$	292,988


LIABILITIES AND SHAREHOLDERS' EQUITY:
	Interest-bearing deposits		183,507		2,397		2.63	%	$	154,815	$	2,367		3.07	%
	FHLB advances and other borrowings		32,512		272		1.69	%		33,815		448		2.66	%
	Long-term borrowings at other banks		35,000		650		3.75	%		11,923		221		3.73	%
Total Interest-Bearing Liabilities			251,019		3,319		2.67	%		200,553		3,036		3.04	%

	Noninterest-bearing deposits		14,026							9,580
	Other noninterest-bearing liabilities		2,376							2,829
	Shareholders' equity		69,559							80,026

Total		$	336,980						$	292,988


Net Interest Income				$	5,183						$	5,185


Net Interest Margin							3.33	%						3.72	%


Interest rate spread							2.79	%						2.85	%

Average interest-earning assets to
	average interest-bearing liabilities						125.10	%						139.83	%

	Six Months Ended
	June 30, 2009 Compared to June 30, 2008
	Increase (Decrease) Due To
	Volume		Rate			Net
	(Dollars in thousands)
Interest earned on:
Interest-earning assets:
Interest-earning demand deposits	$	75	$	(118	)	$	(43	)
Loans		1,432		(288	)		1,144
Investment securities		97		(881	)		(784	)
Other interest-earning assets		261		(297	)		(36	)
Total Earning Assets		1,865		(1,584	)		281

Interest paid on:
Interest bearing deposits		161		(131	)		30
FHLB advances and other borrowings		132		(308	)		(176	)
Long-term borrowings at other banks		869		(440	)		429
Total Interest-Bearing Liabilities		1,162		(879	)		283
Net Interest Income	$	703	$	(705	)	$	(2	)

Provision for Loan Losses. For the six months ended June 30, 2009, we recorded a provision for loan losses of $327,000 compared to a provision of $357,000 for the six months ended June 30, 2008.

Non-interest Income. The following table summarizes non-interest income for the six months ended June 30, 2009 and 2008 and the percentage change for each category of income.

	Six Months Ended June 30,
	2009			2008			% Change
				(Dollars in thousands)
Non-interest Income
Customer service and other fees		577			577			0.00	%
Loan servicing and other fees		31			21			47.62	%
Net gains on mortgage loan sales		698			327			113.46	%
Net realized gain on sales of available-for-sale securities		5			36			(86.11	) %
Net gain on sales of assets-held-for sale		-			295			(100.00	) %
Commissions on insurance and brokerage		62			150			(58.67	) %
Net loss on premises and equipment		(1	)		(37	)		97.30	%
Other		13			21			(38.10	) %
Total noninterest income	$	1,385		$	1,390			(0.36	) %

Non-interest income was relatively flat for the six months ended June 30, 2009 compared the corresponding period in 2008. Net gains on mortgage loans sold increased $371,000 during the first half of 2009 compared to the first half of 2008.

During the first quarter of 2008 the Company benefited from a non-recurring realized gain on the sale of other assets held-for-sale of $295,000 which was primarily related to the sale of the Bank’s former main office.

Insurance and brokerage commissions decreased by $88,000, or 58.7%, as the brokerage business declined substantially due to current adverse equity market conditions.

Non-interest Expense. The following table summarizes non-interest expense for the six months ended June 30, 2009 and 2008 and the percentage change for each expense category.

	Six Months Ended June 30,
	2009		2008		% Change
	(Dollars in thousands)
Non-interest Expense
Salaries and employee benefits	$	2,992	$	2,945		1.60	%
Net occupancy expense		338		240		40.83	%
Equipment expense		320		288		11.11	%
Data processing fees		484		381		27.03	%
Professional fees		232		325		(28.62	) %
Marketing expense		164		133		23.31	%
Office expense		146		141		3.55	%
Losses on foreclosed assets, net		8		3		166.67	%
Insurance expense		40		44		(9.09	) %
Mortgage loan outsourced servicing		18		26		(30.77	) %
Other		1,034		539		91.84	%
Total noninterest expense	$	5,776	$	5,065		14.04	%

Total non-interest expense increased $711,000, or 14.0% to $5.8 million for the six months ended June 30, 2009 as compared to the same period in 2008. Other expense increased by $495,000, or 91.8%, to $1.0 million for the six months ended June 30, 2009, compared to the same period in 2008, which was mainly attributable to higher FDIC insurance premiums due to an industry-wide increase in assessment rates during the first quarter of 2009 and the imposition of a one-time special assessment at June 30, 2009. Expenses for stock awards for directors related to the Company’s 2008 Equity Incentive Plan also contributed to the increase in other expenses.

Salaries and employee benefits costs increased by $47,000 as expenses resulting from stock awards related to the Company’s 2008 Equity Incentive Plan and higher commission costs tied to increased mortgage loan origination activity increased expenses and lower bonus amounts and higher deferred loan costs decreased expenses.

The addition of a new branch facility and increases in property tax, maintenance and utility costs contributed to an increase in occupancy expense of $98,000 or 40.8% for the six months ended June 30, 2009 compared to the six months ended June 30, 2008. During the first half of 2009, data processing fees increased $103,000 or 27.0% due to expanded service offerings and increased volume related to our new branch facility and marketing expense increased $31,000 or 23.3% compared to the first half of 2008 as management focused on bringing key strategic initiatives to fruition.

Professional fees declined $93,000 or 28.6%, primarily due to lower attorneys’ fees and audit and tax expense resulting from changing our external auditors during the second half of 2008.

Income Taxes. Income tax expense for the six months ended June 30, 2009 was $155,000 compared to $15,000 for the same period in 2008. During the second quarter of 2009 management reduced its FIN 48 tax liability by $39,000 and during the second quarter of 2008 the FIN 48 tax liability was reduced by $251,000. The federal effective income tax ratio (federal income taxes divided by income before taxes) was 33.33% for the six months ended June 30, 2009.

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, borrowings from the Federal Home Loan Bank of Cincinnati and borrowings from other financial institutions. 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 our asset/liability management policy.

The Bank’s most liquid assets are cash and cash equivalents, which includes interest-bearing deposits at other banks. The levels of these assets depend on the Bank’s operating, financing, lending and investing activities during any given period. At June 30, 2009, cash and cash equivalents totaled $21.1 million. Securities classified as available-for-sale, totaling $117.2 million at June 30, 2009, provide additional sources of liquidity. In addition, at June 30, 2009, the Bank’s maximum collateral borrowing capacity was approximately $72.3 million from the Federal Home Loan Bank of Cincinnati. At June 30, 2009, the Bank had $28.0 million of Federal Home Loan Bank advances outstanding.

Capital Management. The Bank is subject to various regulatory capital requirements administered by the Office of Thrift Supervision, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At June 30, 2009, the Bank 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 June 30, 2009:

Tier 1 Core Capital (to adjusted total assets)	11.82%
Tangible Equity Ratio (to tangible assets)	11.82%
Tier 1 Risk-Based Capital (to risk-weighted assets)	17.28%
Total Risk-Based Capital (to risk-weighted assets)	18.31%

Dividends. The Board of Directors of the Company declared and paid dividends per common share of $0.10 during the first half of 2009. The dividend payout ratio for the first six months of 2009, representing dividends per share divided by diluted earnings per share, was 142.9%. 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 six months ended June 30, 2009, we did not engage in any off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Effects of Inflation and Changing Prices. The unaudited condensed consolidated interim financial statements and related financial data presented in this interim report have been prepared according to GAAP, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution’s performance than do general levels of inflation. 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 June 30, 2009, 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, 2008 as filed with the SEC on March 25, 2009.

Item 4T. 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 June 30, 2009 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 June 30, 2009, the Company was not a party to any pending legal proceedings. At June 30, 2009, First Federal Savings Bank was not a party to any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. Such routine legal proceedings, in the aggregate, are believed by management to be immaterial to the Bank’s financial condition and results of operations.

Item 1A. Risk Factors.

For information regarding the Company’s risk factors, see “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 as filed with the SEC on March 25, 2009. As of June 30, 2009, 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 one stock repurchase program. The stock repurchase program allows the Company to proactively manage its capital position and return excess capital to shareholders. Under the 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 outstanding 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 most recent fiscal quarter.

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
April 1, 2009 to April 30, 2009		-	$	-		-		263,234
May 1, 2009 to May 31, 2009		25,000		9.554		25,000		238,234
June 1, 2009 to June 30, 2009		40,350		9.417		40,350		197,884
Total		65,350	$	9.469		65,350		197,884

Item 3. Defaults Upon Senior Securities.

None

Item 4. Submission of Matters to a Vote of Security Holders.

a.	An annual meeting of shareholders of the Company was held May 20, 2009 (the “Annual Meeting”).

b.	Not applicable

c.	The items voted upon at the Annual Meeting and the vote for each proposal were, as follows:

1.	Election of directors.

Election of directors with terms ending in 2012

Nominee	For	Withheld
Vernon M. Carrigan	3,811,164	28,095
John T. Halliburton	3,816,204	23,055
David L. Watson	3,823,680	15,579

The ratification of the appointment of Horne LLP as independent auditors of the Company for the fiscal year ending December 31, 2009.

For	Against	Abstain
3,812,978	-	26,281

Item 5. Other Information.

None

Item 6. Exhibits

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

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

SIGNATURES

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

FIRST ADVANTAGE BANCORP

Dated: August 11, 2009	By: /s/Earl O. Bradley, III
	Earl O. Bradley, III
	Chief Executive Officer



Dated: August 11, 2009	By: /s/Patrick C. Greenwell
	Patrick C. Greenwell
	Chief Financial Officer