10-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Mark One)

[X]         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  For the fiscal year ended December 31, 2011

OR

[   ]        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: 1-33682

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $0.01 per share	Nasdaq Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Act:                                                                                                                     None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ___   No    X  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ___ No    X    

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes     X       No ___

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

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  

As of June 30, 2011, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the shares of common stock held by non-affiliates, based upon the closing price per share of the registrant’s common stock on the Nasdaq Global Market, was approximately $40.27 million.

The number of shares outstanding of the registrant’s common stock as of March 8, 2012 was 4,406,535.

DOCUMENT INCORPORATED BY REFERENCE:

Portions of the Proxy Statement for the 2012 Annual Meeting of Shareholders of First Advantage Bancorp, to be held on May 16, 2012, are incorporated by reference in Part III of this Form 10-K.

INDEX

		Page
	Part I
Item 1.	Business	1
Item 1A.	Risk Factors	19
Item 1B.	Unresolved Staff Comments	25
Item 2.	Properties	25
Item 3.	Legal Proceedings	26
Item 4.	Mine Safety Disclosures	26
	Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26
Item 6.	Selected Financial Data	28
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 8.	Financial Statements and Supplementary Data	51
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	51
Item 9A.	Controls and Procedures	52
Item 9B.	Other Information	52
	Part III
Item 10.	Directors, Executive Officers and Corporate Governance	52
Item 11.	Executive Compensation	53
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	53
Item 13.	Certain Relationships and Related Transactions, and Director Independence	53
Item 14.	Principal Accounting Fees and Services	53
	Part IV
Item 15.	Exhibits and Financial Statement Schedules	54
	SIGNATURES	55

This annual 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  identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. First Advantage Bancorp’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 First Advantage Bancorp and its subsidiary include, but are not limited to, changes in interest rates, national and regional economic conditions, legislative and regulatory changes, monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in First Advantage Bancorp’s market area, changes in real estate market values in First Advantage Bancorp’s market area, changes in relevant accounting principles and guidelines and inability of third party service providers to perform. Additional factors that may affect our results are discussed in Item 1A to this Annual Report on Form 10-K titled “Risk Factors” below.

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, First Advantage Bancorp 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.

Unless the context indicates otherwise, all references in this annual report to “Company,” “we,” “us” and “our” refer to First Advantage Bancorp and its subsidiary.

PART I

Item 1.  BUSINESS

General

First Advantage Bancorp (the “Company”) is a Tennessee chartered company incorporated in June 2007 to serve as the holding company for First Advantage Bank (the “Bank”), a Tennessee-chartered commercial bank formerly known as First Federal Savings Bank.  First Advantage Bancorp’s principal business activity is the ownership of the outstanding common stock of the Bank.  First Advantage Bancorp uses the premises, equipment and other property of the Bank with the payment of appropriate rental fees, as required by applicable law and regulations, under the terms of an expense allocation agreement.  Accordingly, the information set forth in this annual report, including the consolidated financial statements and related financial data contained herein, relates primarily to the Bank.

About First Advantage Bank

The Bank was originally founded in 1953 and headquartered in Clarksville, Tennessee.  The Bank operates as a community-oriented financial institution offering traditional financial services to customers and businesses in the Bank’s primary market area.  The Bank attracts deposits from the general public and uses those funds to originate one-to-four family mortgage loans, nonresidential real estate loans, construction loans (including speculative construction loans) commercial business loans and land loans, and, to a lesser extent, multi-family loans and consumer loans.

We have posted our Code of Ethics for directors, officers and employees, and the charters of the Audit Committee, Compensation Committee, and Nominating Committee of our board of directors on the Investor Relations section of our website at www.firstadvantagebanking.com. The Company’s and the Bank’s executive offices are located at 1430 Madison Street, Clarksville, Tennessee and our main telephone number is (931) 552-6176.  Information on our website should not be considered a part of this annual report.

1

Bank Charter Conversion

On November 2, 2011, the Board of Directors of the Bank approved a change of the Bank’s name to First Advantage Bank in anticipation of the Bank’s conversion from a federally-chartered savings bank to a Tennessee-chartered commercial bank.  The Bank’s FDIC insurance coverage, and rates and terms of loans and deposits, did not change.  

On February 2, 2012, the Bank completed its conversion from a federally chartered savings bank to a Tennessee-chartered commercial bank.  On that same date, the Company became a holding company regulated by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”).  As a result of the charter conversion, the Bank is now regulated by the Tennessee Department of Financial Institutions (the “TDFI”) and the Federal Deposit Insurance Corporation (the “FDIC”).  The Bank’s deposits continue to be insured by the FDIC.  The charter conversion is not expected to have any significant financial impact or affect the Company’s and the Bank’s current activities, and no changes to the directors or officers or employees of the Bank occurred as a result of the charter conversion

Market Area

We consider Montgomery County, Tennessee and the surrounding areas to be our primary market area.    The top employment sectors in the county are currently the services industry, wholesale/retail trade and government and manufacturing, which are likely to continue to be supported by the projected growth in population and median household income.

The economy of Montgomery County is significantly influenced by Fort Campbell, a nearby U.S. Army installation, and Austin Peay State University, one of the county’s top employers and one of the fastest growing universities in Tennessee, with an enrollment of approximately 10,800 students, and by the county’s proximity to Nashville, Tennessee.  A growing number of young military retirees from Fort Campbell and the expanding Austin Peay State University community, as well as an increased number of commuters to the Nashville metropolitan area, have created a housing demand that currently supports lending activities in our primary market area.  Additionally,  Hemlock Semiconductor LLC (“HSC”), a polycrystalline silicon manufacturer,  is constructing a new state-of-the-art $1.2 billion manufacturing facility in Clarksville. Upon completion of the initial investment, the Clarksville site is expected to employ more than 500 people.  It is anticipated that construction of the HSC facility will also employ approximately 1,000 construction workers during the next three to five years.

Competition

We face significant competition for the attraction of deposits and origination of loans.  Our most direct competition for deposits has historically come from the several financial institutions operating in our primary market area and from other financial service companies such as securities and mortgage brokerage firms, credit unions and insurance companies.  We also face competition for investors’ funds from money market funds, mutual funds and other corporate and government securities.  This data does not reflect deposits held by credit unions with which we also compete.  In addition, banks owned by large national and regional holding companies and other community-based banks also operate in our primary market area.  Some of these institutions are larger than us and, therefore, may have greater resources.

Our competition for loans comes primarily from financial institutions in our primary market area and from other financial service providers, such as mortgage companies and mortgage brokers.  Competition for loans also comes from the increasing number of non-depository financial service companies entering the mortgage market, such as credit unions, insurance companies, securities companies and specialty finance companies.

We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry.  Technological advances, for example, have lowered barriers to entry, allowed banks to expand their geographic reach by providing services over the Internet, and made it possible for non-depository institutions to offer products and services that traditionally have been provided by banks.  Changes in federal law now permit affiliation among banks, securities firms and insurance companies, which promotes a competitive environment in the financial services industry.  Competition for deposits and the origination of loans could limit our growth in the future.

We believe we are not dependent upon any single industry or customer.

2

Lending Activities

The largest segment of our loan portfolio is real estate mortgage loans, primarily one-to-four family residential loans and nonresidential real estate loans.  The other significant segments of our loan portfolio are construction loans, primarily one-to-four family construction loans (including speculative construction loans), multi-family loans, commercial business loans and land loans.  To a lesser degree, we also originate consumer loans.  We originate loans for investment purposes, although we generally sell a substantial majority of our one-to-four family residential loans into the secondary market with servicing released.  See note 5 to the notes to the consolidated financial statements beginning on page F-1 of this annual report.  We originate conforming permanent mortgage loans and sell a substantial majority of our one-to-four family residential loans into the secondary market with servicing released.

We intend to continue to emphasize residential and non-residential real estate lending while concentrating on ways to expand our consumer/retail banking capabilities and our commercial banking services with a focus on serving small businesses and emphasizing relationship banking in our primary market area.

One-to-Four Family Residential Loans.  Our origination of residential mortgage loans enables borrowers to purchase or refinance existing homes located in Montgomery County, Tennessee, and the surrounding areas.

Our residential lending policies and procedures conform to the secondary market guidelines as we generally sell qualifying fixed-rate loans into the secondary market.  We generally offer fixed-rate mortgage loans with terms of 10 to 30 years.  To a lesser extent, we also offer adjustable-rate mortgage loans.  Borrower demand for adjustable-rate loans compared to fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, and the difference between the interest rates and loan fees offered for fixed-rate mortgage loans as compared to an initially discounted interest rate and loan fees for multi-year adjustable-rate mortgages.  The relative amount of fixed-rate mortgage loans and adjustable-rate mortgage loans that can be originated at any time is largely determined by the demand for each in a competitive environment.  The loan fees, interest rates and other provisions of mortgage loans are determined by us based on our own pricing criteria and competitive market conditions.

Interest rates and payments on our adjustable-rate mortgage loans generally adjust annually after an initial fixed period that typically ranges from one to three years.  Interest rates and payments on our adjustable-rate loans generally are adjusted to a rate typically equal to a percentage above the three or five year U.S. Treasury index or indexed to prime.  The maximum amount by which the interest rate may be increased or decreased is generally two percentage points per adjustment period and the lifetime interest rate cap is generally six percentage points over the initial interest rate of the loan.  We sell with servicing released a substantial majority of all one-to-four family loans we originate.

While one-to-four family residential real estate loans are normally originated with up to 30-year terms, such loans typically remain outstanding for substantially shorter periods because borrowers often prepay their loans in full either upon sale of the property pledged as security or upon refinancing the original loan.  Therefore, average loan maturity is a function of, among other factors, the level of purchase and sale activity in the real estate market, prevailing interest rates and the interest rates payable on outstanding loans on a regular basis.  We do not offer loans with negative amortization and generally do not offer interest-only loans other than for revolving home equity lines of credit.

For the most part, we do not make conventional loans with loan-to-value ratios exceeding 95%.  Loans with loan-to-value ratios in excess of 80% generally require private mortgage insurance.  We generally require all properties securing mortgage loans to be appraised by a board-approved independent appraiser.  We generally require title insurance on all first mortgage loans.  Borrowers must obtain hazard insurance, and flood insurance is required for loans on properties located in a flood zone.

3

Nonresidential Real Estate Loans.  We offer fixed- and adjustable-rate mortgage loans secured by nonresidential real estate.  Our nonresidential real estate loans are generally secured by small to moderately-sized office, retail and industrial properties located in our primary market area and are typically made to small business owners and professionals such as developers, physicians, attorneys and accountants.

We originate a variety of fixed- and adjustable-rate nonresidential real estate loans, generally for terms of one to seven years and with payments based on an amortization schedule of 15 to 25 years.  Our adjustable-rate loans generally adjust based on either the prime lending rate or the First Advantage Base Rate every three to five years.  Loans are secured by first mortgages, generally are originated with a maximum loan-to-value ratio of 80% and generally require specified debt service coverage ratios depending on the characteristics of the project.  Rates and other terms on such loans generally depend on our assessment of credit risk after considering such factors as the borrower’s financial condition and credit history, loan-to-value ratio, debt service coverage ratio and other factors.

At December 31, 2011, our largest nonresidential real estate loan had an outstanding balance of $6.0 million.  This loan, which was originated in February 2011, is secured by a deed of trust and was performing in accordance with its original terms at December 31, 2011.

Construction Loans.We originate construction loans for one-to-four family homes and commercial, multi-family and other nonresidential purposes.  Interest rates on these loans are generally tied to the prime lending rate or the First Advantage Bank base rate.  We generally may finance up to 75% to 80% of the appraised value of the completed property.  We also offer construction loans for the financing of one-to-four family and multiple family homes, which may convert into permanent loans at the end of the construction period.  We generally require a maximum loan-to-value ratio of 80% for construction loans on owner occupied homes.  We generally disburse funds on a percentage-of-completion basis following an inspection by a third party inspector.  At December 31, 2011, our largest non-speculative construction loan commitment was for $1.8 million, with an outstanding balance of $1.5 million.   This loan commitment was originated in May 2011 and the loan is performing as agreed.

We also originate speculative construction loans to builders who have not identified a buyer for the completed property at the time of origination.  In contrast to many markets across the country, the bank’s primary market area had no sharp price increases prior to the recession.  Consequently, property values have remained relatively stable and speculative housing has continued to sell, although at a somewhat slower pace.  The proximity of Fort Campbell, Kentucky continues to drive a large part of the speculative housing demand in the area.  At December 31, 2011, we had approved commitments for speculative construction loans of $24.0 million, of which $16.0 million was outstanding.  We require a maximum loan-to-value ratio of 80% for speculative construction loans.  We believe we have implemented strict underwriting requirements for speculative construction loans to help ensure that loans are made to a limited group of reputable, financially sound builders and for feasible projects having an adequate demand to facilitate the sale of the properties within an acceptable period of time.  Each month we monitor the total number of speculative units under construction, the number of units with each builder, and the number of units within each subdivision.  At December 31, 2011, our largest aggregate speculative construction loan commitment to a single builder was for $2.6 million, of which $868,000 was outstanding.  The origination dates for these loans were from August 2010 through December 2011and are secured by eleven single family residences under construction and the underlying lots.  At December 31, 2011, these loans were performing in accordance with their original terms.

Land Loans.  We originate loans to developers for the purpose of developing vacant land in our primary market area, typically for residential subdivisions.  Land loans are generally interest-only loans for a term of up to three years (one year to develop the property and approximately two years to liquidate the lots with a minimum principal reduction required annually and with repayment in full resulting from the sale of the improved property.  At December 31, 2011, our largest land loan had an outstanding balance of $1.7 million.  This loan, which was originated August 2010 and is secured by approximately 37 acres, was performing in accordance with its original terms at December 31, 2011.

Multi-Family Real Estate Loans.  We offer multi-family mortgage loans that are generally secured by apartment buildings in our primary market area.  We originate a variety of fixed- and adjustable-rate multi-family real estate loans, generally for terms of one to seven years and with payments based on an amortization schedule of 15 to 25 years.  Our adjustable-rate loans generally adjust based on the prime lending rate or the First Advantage Base Rate every three to five years.   Loans are secured by first mortgages and generally are originated with a maximum loan-to-value ratio of 80% and generally require specified debt service coverage ratios depending on the characteristics of the project.  Rates and other terms on such loans generally depend on our assessment of the credit risk after considering such factors as the borrower’s financial condition and credit history, loan-to-value ratio, debt service coverage ratio and other factors.

4

Consumer Loans.  Although we offer a variety of consumer loans, our consumer loan portfolio consists primarily of home equity loans, both fixed-rate amortizing term loans and variable rate lines of credit.  Consumer loans typically have shorter maturities and higher interest rates than traditional one-to-four family lending.  When combined with a first mortgage loan, we will typically make home equity loans up to a loan-to-value ratio of 90%.  The procedures for underwriting consumer loans include an assessment of the applicant’s payment history on other debts and ability to meet existing obligations and payments on the proposed loan.  Although the applicant’s creditworthiness is a primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, to the proposed loan amount.

Commercial Business Loans.  We typically offer commercial business loans to small businesses located in our primary market area.  Commercial business loans are generally secured by equipment, inventory or accounts receivable of the borrower.  Key loan terms vary depending on the collateral, the borrower’s financial condition, credit history and other relevant factors, and personal guarantees are typically required as part of the loan commitment.

Loan Underwriting Risks

Adjustable-Rate Loans. While we anticipate that adjustable-rate loans will better offset the adverse effects of an increase in interest rates as compared to fixed-rate mortgages, an increased monthly mortgage payment required of adjustable-rate loan borrowers in a rising interest rate environment could cause an increase in delinquencies and defaults.  The marketability of the underlying property also may be adversely affected in a high interest rate environment.  In addition, although adjustable-rate mortgage loans make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits.

Multi-Family and Nonresidential Real Estate Loans.  Loans secured by multi-family and nonresidential real estate generally have larger balances and involve a greater degree of risk than one-to-four family residential mortgage loans.  Of primary concern in multi-family and nonresidential real estate lending is the borrower’s creditworthiness and the feasibility and cash flow potential of the project.  Payments on loans secured by income properties often depend on successful operation and management of the properties.  As a result, repayment of such loans may be subject, to a greater extent than residential real estate loans, to adverse conditions in the real estate market or the economy.  To monitor cash flows on income properties, we require borrowers and loan guarantors, if any, to provide annual financial statements on multi-family and nonresidential real estate loans.  In reaching a decision on whether to make a multi-family or nonresidential real estate loan, we consider and review a global cash flow analysis of the borrower and consider the net operating income of the property, the borrower’s expertise, credit history and profitability, and the value of the underlying property.  An environmental survey or environmental risk insurance is obtained when the possibility exists that hazardous materials may have existed on the site, or the site may have been impacted by adjoining properties that handled hazardous materials.

Construction and Land Loans. Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate.  Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction and the estimated cost of construction.  During the construction phase, a number of factors could result in delays and cost overruns.  If the estimate of construction costs proves to be inaccurate, we may be required to advance funds beyond the amount originally committed to permit completion of the building.  If the estimate of value proves to be inaccurate, we may be confronted, at or before the maturity of the loan, with a building having a value which is insufficient to assure full repayment if liquidation is required.  If we are forced to foreclose on a building before or at completion due to a default, there can be no assurance that we will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs.  In addition, speculative construction loans, which are loans made to home builders who, at the time of loan origination, have not yet secured an end buyer for the home under construction, typically carry higher risks than those associated with traditional construction loans.  These increased risks arise because of the risk that there will be inadequate demand to ensure the sale of the property within an acceptable time.  As a result, in addition to the risks associated with traditional construction loans, speculative construction loans carry the added risk that the builder will have to pay the property taxes and other carrying costs of the property until an end buyer is found.  Land loans have substantially similar risks to speculative construction loans.

5

Consumer Loans.  Consumer loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are secured by assets that depreciate rapidly, such as motor vehicles.  In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower.  Consumer loan collections depend on the borrower’s continuing financial stability and, therefore, are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy.  Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

Commercial Business Loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment income or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial business loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business.  As a result, the availability of funds for the repayment of commercial business loans may depend substantially on the success of the business itself.  Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

Loan Approval Procedures and Authority.  Our lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by our board of directors and management.

Loans to One Borrower.  At December 31, 2011, our largest lending relationship and our largest outstanding loan balance to one borrower was $7.6 million, which was comprised of a developed subdivision, an adjacent tract for future development, a farm and a construction loan for a personal residence.   These loans were performing according to their original terms at December 31, 2011.

Loan Commitments.  We issue commitments for fixed- and adjustable-rate mortgage loans conditioned upon the occurrence of certain events.  Commitments to originate mortgage loans are legally binding agreements to lend to our customers.  Generally, our loan commitments expire after 30 to 45 days.  See note 16 to the notes to the consolidated financial statements beginning on page F-1 of this annual report.

Investment Activities

We have legal authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various government-sponsored agencies and of state and municipal governments, collateralized mortgage obligations and mortgage-backed securities.  Within certain regulatory limits, we may also invest a portion of our assets in other permissible securities.  As a member of the Federal Home Loan Bank of Cincinnati, we also are required to maintain an investment in Federal Home Loan Bank of Cincinnati stock.

At December 31, 2011, our investment portfolio consisted primarily of mortgage-backed securities, U.S. government and agency securities, including debt securities issued by government sponsored enterprises, municipal and other bonds, collateralized mortgage obligations and corporate debt securities.

We invest in callable securities.  Our callable securities, with a fair market value of $17.0 million at December 31, 2011, consist of U.S. government agency bonds and securities that are callable within one year, corporate debt securities that are callable at periods ranging from one to three years, and state and political subdivision bonds that are callable beginning in periods ranging from two to ten years. We face reinvestment risk with callable securities, particularly during periods of falling market interest rates when issuers of callable securities tend to call or redeem their securities.  Reinvestment risk is the risk that we may have to reinvest the proceeds from called securities at lower rates of return than the rates paid on the called securities.

Our investment objectives are to provide and maintain liquidity, to establish an acceptable level of interest rate and credit risk, and to provide an alternate source of low-risk investments at a favorable return when loan demand is weak.  Our board of directors has the overall responsibility for the investment portfolio, including approval of the investment policy.  Our Chief Financial Officer and Chief Executive Officer are responsible for implementation of the investment policy and monitoring our investment performance.  Our board of directors receives monthly reports on investment activity and, as part of the monthly financial report, is informed as to the mix of investments, yields by category of investment and the overall yield on the portfolio, as well as any gains or losses incurred during the prior month.

6

Deposit Activities and Other Sources of Funds

Deposits, borrowings, loan repayments, mortgage-backed security repayments and called investments are the major sources of our funds for lending and other investment purposes.  Scheduled loan and mortgage-backed security repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments and security calls are significantly influenced by general interest rates and money market conditions.

Deposit Accounts.  Substantially all of our depositors are residents of Tennessee.  Deposits are attracted from within our primary market area through the offering of a broad selection of deposit instruments, including non-interest-bearing demand deposits (such as checking accounts), interest-bearing demand accounts (such as NOW and money market accounts), regular savings accounts and certificates of deposit.  Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors.  In determining the terms of our deposit accounts, we consider the rates offered by our competition, our liquidity needs, profitability to us, matching deposit and loan products and customer preferences and concerns.  We review our deposit mix and pricing weekly.   Our deposit pricing strategy has typically been to offer competitive rates on all types of deposit products, and to regularly offer special rates in order to attract deposits of a specific type or term.

In addition to accounts for individuals, we also offer deposit accounts designed for the businesses operating in our primary market area.  Our business banking deposit products include commercial checking accounts and money market accounts.

Borrowings.  We use advances from the Federal Home Loan Bank of Cincinnati and Federal Reserve Bank through the Discount Window to supplement our investable funds.  The Federal Home Loan Bank functions as a central reserve bank providing credit for member financial institutions.  As a member, we are required to own capital stock in the Federal Home Loan Bank and are authorized to apply for advances on the security of such stock and certain of our mortgage loans, non-residential real estate loans and other assets (principally securities which are obligations of, or guaranteed by, the United States), provided certain standards related to creditworthiness have been met.  Advances are made under several different programs, each having its own interest rate and range of maturities.  Depending on the program, limitations on the amount of advances are based either on a fixed percentage of an institution’s net worth or on the Federal Home Loan Bank’s assessment of the institution’s creditworthiness.

Personnel

As of December 31, 2011, we had 87 full-time employees and 8 part-time employees, none of whom is represented by a collective bargaining unit.  We believe that our relationship with our employees is good.

Subsidiaries

First Advantage Bank has one subsidiary, First Financial Mortgage Corp., which was inactive at December 31, 2011.  On December 19, 2007, First Financial Mortgage Corp. conveyed its only remaining tangible asset, the Blue Hole Lodge, to First Advantage Bancorp for the sum of $200,000.   Acquired in 2001 as a meeting and training center, the Blue Hole Lodge property consists of approximately five acres with an improved lodge building.  Acquisition and improvement costs totaled approximately $1.3 million.  As of December 31, 2011, the property had been written down to $200,000, which is the estimated fair market value of the property.

7

REGULATION AND SUPERVISION

General

The Bank is a Tennessee commercial bank and its deposit accounts are insured by the FDIC. The Bank  is not a member of the Federal Reserve System. The Bank is subject to supervision, examination and regulation by the TDFI and  the FDIC. The Bank is required to file regulatory reports concerning its activities and financial condition and is required to obtain regulatory approvals prior to entering into certain transactions, including mergers with, or acquisitions of, other depository institutions.

The system of regulation and supervision applicable to the Bank establishes a comprehensive framework for the operations of the Bank and is intended primarily for the protection of the FDIC and the depositors of the Bank. Changes in the regulatory framework could have a material effect on the Bank and its respective operations that in turn, could have a material adverse effect on the Company.

The Company registered with the Board of Governors of the Federal Reserve as a bank holding company under the Bank Holding Company Act of 1956. As a result, it is subject to supervisory regulation and examination by the Federal Reserve. The Gramm-Leach-Bliley Act, the Bank Holding Company Act, and other federal laws subject bank holding companies to particular restrictions on the types of activities in which they may engage, and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations

Certain of the regulatory requirements that are applicable to First Advantage Bancorp and the Bank are described below.  This description of statutes and regulations is not intended to be a complete explanation of such statutes and regulations and their effects on First Advantage Bancorp and the Bank and is qualified in its entirety by reference to the actual statutes and regulations.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ( the “Dodd-Frank Act”). The Dodd-Frank Act will continue to have a broad impact on the financial services industry as a result of the significant regulatory and compliance changes including, among other things, (i) enhanced resolution authority over troubled and failing banks and their holding companies; (ii) increased capital and liquidity requirements; (iii) increased regulatory examination fees; (iv) changes to assessments to be paid to the FDIC for federal deposit insurance; and (v) numerous other provisions designed to improve supervision and oversight of, and strengthening safety and soundness for, the financial services sector. Additionally, the Dodd-Frank Act establishes a new framework for systemic risk oversight within the financial system to be distributed among new and existing federal regulatory agencies, including the Financial Stability Oversight Council, the Federal Reserve, the Office of the Comptroller of the Currency, and the FDIC. A summary of certain provisions of the Dodd-Frank Act is set forth below, along with information set forth in applicable sections of this “Regulation and Supervision” section.

·   Minimum Capital Requirements and Enhanced Supervision. On June 14, 2011, the federal banking agencies published a final rule regarding minimum leverage and risk-based capital requirements for banks and bank holding companies consistent with the requirements of Section 171 of the Dodd-Frank Act. The Dodd-Frank Act also increased regulatory oversight, supervision and examination of banks, bank holding companies and their respective subsidiaries by the appropriate regulatory agency.

·   The Consumer Financial Protection Bureau (“Bureau”). The Dodd-Frank Act created the Bureau within the Federal Reserve. The Bureau is tasked with establishing and implementing rules and regulations under certain federal consumer protection laws with respect to the conduct of providers of certain consumer financial products and services. The Bureau has rulemaking authority over many of the statutes governing products and services offered to bank consumers. In addition, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are more stringent than those regulations promulgated by the Bureau and state attorneys general are permitted to enforce consumer protection rules adopted by the Bureau against state-chartered institutions.

·   Deposit Insurance. The Dodd-Frank Act makes permanent the $250,000 deposit insurance limit for insured deposits. The Dodd-Frank Act also required amendments to the Federal Deposit Insurance Act that revised the assessment base against which an insured depository institution’s deposit insurance premiums paid to the Deposit Insurance Fund (“DIF”) will be calculated. Under the amendments, which became effective on April 1, 2011, the assessment base will no longer be the institution’s deposit base, but rather its average consolidated total assets less its average tangible equity during the assessment period. Additionally, the Dodd-Frank Act made changes to the minimum designated reserve ratio of the DIF, increasing the minimum from 1.15 percent to 1.35 percent of the estimated amount of total insured deposits and eliminating the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain thresholds. In December 2010, the FDIC increased the designated reserve ratio to 2.0 percent.

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·   Payment of Interest on Demand Deposits. On July 21, 2011, the Federal Reserve’s final rule repealing Regulation Q, Prohibition Against Payment of Interest on Demand Deposits, became effective. Regulation Q was promulgated to implement the statutory prohibition against payment of interest on demand deposits by institutions that are member banks of the Federal Reserve.

·   Transactions with Affiliates. The Dodd-Frank Act enhances the requirements for certain transactions with affiliates under Section 23A and 23B of the Federal Reserve Act, including an expansion of the definition of “covered transactions” and increasing the amount of time for which collateral requirements regarding covered transactions must be maintained. These requirements became effective on July 21, 2011.

·   Transactions with Insiders. The Dodd- Frank Act expanded insider transaction limitations through the strengthening of loan restrictions to insiders and the expansion of the types of transactions subject to the various limits, including derivative transactions, repurchase agreements, reverse repurchase agreements and securities lending or borrowing transactions. Restrictions are also placed on certain asset sales to and from an insider to an institution, including requirements that such sales be on market terms and, in certain circumstances, approved by the institution’s board of directors. These requirements became effective on July 21, 2011.

·   Enhanced Lending Limits. The Dodd-Frank Act strengthened the previous limits on a depository institution’s credit exposure to one borrower which limited a depository institution’s ability to extend credit to one person (or group of related persons) in an amount exceeding certain thresholds. The Dodd-Frank Act expanded the scope of these restrictions to include credit exposure arising from derivative transactions, repurchase agreements, and securities lending and borrowing transactions.

·   Compensation Practices. The Dodd-Frank Act provided that the appropriate federal regulators must establish standards prohibiting as an unsafe and unsound practice any compensation plan of a bank holding company or other “covered financial institution” that provides an insider or other employee with “excessive compensation” or compensation that gives rise to excessive risk or could lead to a material financial loss to such firm. In June 2010, prior to the Dodd-Frank Act, the bank regulatory agencies promulgated the Interagency Guidance on Sound Incentive Compensation Policies, which requires that financial institutions establish metrics for measuring the impact of activities to achieve incentive compensation with the related risk to the financial institution of such behavior.

Although a significant number of the rules and regulations mandated by the Dodd-Frank Act have been finalized, many of the new requirements called for have yet to be implemented and will likely be subject to implementing regulations over the course of several years. Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented by the various regulatory agencies, the full extent of the impact such requirements will have on financial institutions’ operations is unclear. The changes resulting from the Dodd-Frank Act may impact the profitability of our business activities, require changes to certain of our business practices, impose upon us more stringent capital, liquidity and leverage ratio requirements or otherwise adversely affect our business. These changes may also require us to invest significant management attention and resources to evaluate and make necessary changes in order to comply with new statutory and regulatory requirements.

Bank Holding Company and Tennessee Commercial Bank Regulation

 Permitted Activities.

The Gramm-Leach-Bliley Act modernized the U.S. banking system by: (i) allowing bank holding companies that qualify as “financial holding companies” to engage in a broad range of financial and related activities; (ii) allowing insurers and other financial service companies to acquire banks; (iii) removing restrictions that applied to bank holding company ownership of securities firms and mutual fund advisory companies; and (iv) establishing the overall regulatory scheme applicable to bank holding companies that also engage in insurance and securities operations. The general effect of the law was to establish a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms, and other financial service providers. Activities that are financial in nature are broadly defined to include not only banking, insurance, and securities activities, but also merchant banking and additional activities that the Federal Reserve, in consultation with the Secretary of the Treasury, determines to be financial in nature, incidental to such financial activities, or complementary activities that do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.

In contrast to financial holding companies, bank holding companies are limited to managing or controlling banks, furnishing services to or performing services for its subsidiaries, and engaging in other activities that the Federal Reserve determines by regulation or order to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In determining whether a particular activity is permissible, the Federal Reserve must consider whether the performance of such an activity reasonably can be expected to produce benefits to the public that outweigh possible adverse effects. Possible benefits include greater convenience, increased competition, and gains in efficiency. Possible adverse effects include undue concentration of resources, decreased or unfair competition, conflicts of interest, and unsound banking practices. Despite prior approval, the Federal Reserve may order a bank holding company or its subsidiaries to terminate any activity or to terminate ownership or control of any subsidiary when the Federal Reserve has reasonable cause to believe that a serious risk to the financial safety, soundness or stability of any bank subsidiary of that bank holding company may result from such an activity.

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 Changes in Control.

Subject to certain exceptions, the Bank Holding Company Act and the Change in Bank Control Act, together with the applicable regulations, promulgated thereunder, require Federal Reserve approval (or, depending on the circumstances, no notice of disapproval) prior to any person or company acquiring “control” of a bank or bank holding company. A conclusive presumption of control exists if an individual or company acquires the power, directly or indirectly, to direct the management or policies of an insured depository institution or to vote 25% or more of any class of voting securities of any insured depository institution. A rebuttable presumption of control exists if a person or company acquires 10% or more but less than 25% of any class of voting securities of an insured depository institution and either the institution has registered securities under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”), or no other person will own a greater percentage of that class of voting securities immediately after the acquisition. The Company’s common stock is registered under Section 12 of the Exchange Act.

The Federal Reserve maintains a policy statement on minority equity investments in banks and bank holding companies, that generally permits investors to (i) acquire up to 33 percent of the total equity of a target bank or bank holding company, subject to certain conditions, including (but not limited to) that the investing firm does not acquire 15 percent or more of any class of voting securities, and (ii) designate at least one director, without triggering the various regulatory requirements associated with control.

As a bank holding company, we are required to obtain prior approval from the Federal Reserve before (i) acquiring all or substantially all of the assets of a bank or bank holding company, (ii) acquiring direct or indirect ownership or control of more than 5% of the outstanding voting stock of any bank or bank holding company (unless we own a majority of such bank’s voting shares), or (iii) merging or consolidating with any other bank or bank holding company. In determining whether to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution’s record of addressing the credit needs of the communities it serves, including the needs of low and moderate income neighborhoods, consistent with the safe and sound operation of the bank, under the Community Reinvestment Act of 1977.

 Capital; Dividends; Source of Strength.

The Federal Reserve imposes certain capital requirements on bank holding companies under the Bank Holding Company Act, including a minimum leverage ratio and a minimum ratio of “qualifying” capital to risk-weighted assets. These requirements are described below under “Capital Regulations.” Subject to its capital requirements and certain other restrictions, we are able to borrow money to make a capital contribution to the Bank, and such loans may be repaid from dividends paid from the Bank to us.

A substantial source of the Company’s income from which it can pay dividends is the receipt of dividends from the Bank. The availability of the Bank to pay dividends to the Company is limited by applicable Tennessee law, which provides that the Bank may not declare dividends in any calendar year that exceeds the total of its net income of that year combined with its retained net income of the preceding two years without the prior approval of the TDFI.  It is also possible, depending upon the financial condition of the Bank, and other factors, that the applicable regulatory authorities could assert that payment of dividends or other payments is an unsafe or unsound practice. In the event that the Bank is unable to pay dividends to the Company, the Company may not be able to pay dividends on its common stock.  See note 12 to the consolidated financial statements beginning on page F-1 of this annual report.

In accordance with Federal Reserve policy, which has been codified by the Dodd-Frank Act, we are expected to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances in which we might not otherwise do so.

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 Insurance of Accounts and Other Assessments.

We pay our deposit insurance assessments to the Deposit Insurance Fund, which is determined through a risk-based assessment system. Our deposit accounts are currently insured by the Deposit Insurance Fund generally up to a maximum of $250,000 per separately insured depositor.

In addition, in November 2008, the FDIC issued a final rule under its Transaction Account Guarantee Program (“TAGP”), pursuant to which the FDIC fully guarantees all non-interest bearing transaction deposit accounts, including all personal and business checking deposit accounts that do not earn interest, attorney trust accounts where interest does not accrue to the account owner (IOLTA), and NOW accounts with interest rates no higher than 0.25%. Thus, under the TAGP, these accounts are fully insured by the FDIC regardless of dollar amount. This second increase to coverage was originally in effect through December 31, 2009, but was extended until June 30, 2010 and then again until December 31, 2010, unless we elected to “opt out” of participating, which we did not do. The Dodd-Frank Act extended full deposit coverage for non-interest bearing transaction deposit accounts for an additional two years beginning on December 31, 2010, and all financial institutions are required to participate in this extended program.

Under the FDIC’s previous risk-based assessment system, insured institutions were assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other factors, with less risky institutions paying lower assessments. An institution’s assessment rate depended upon the category to which it is assigned and, effective April 1, 2009, assessment rates range from seven to 77.5 basis points. On February 7, 2011, the FDIC approved a final rule that implemented changes to the deposit insurance assessment system mandated by the Dodd-Frank Act. The final rule, which became effective on April 1, 2011, revised the base on which deposit insurance assessments are charged from one that is based on domestic deposits to one that is based on average consolidated total assets minus average tangible equity. Under the final rule, insured depository institutions are required to report their average consolidated total assets on a daily basis, using the regulatory accounting methodology established for reporting total assets. For purposes of the final rule, tangible equity is defined as Tier 1 capital.

On May 22, 2009, the FDIC imposed a special assessment of five basis points on each FDIC-insured depository institution’s assets, minus its Tier I capital, as of June 30, 2009. This special assessment was collected on September 30, 2009. Finally, on November 12, 2009, the FDIC adopted a new rule requiring insured institutions to prepay on December 30, 2009, estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011, and 2012. We prepaid an assessment of $1.1 million, which incorporated a uniform 3.00 basis point increase effective January 1, 2011 and assumed 5% annual deposit growth.

In addition, all FDIC insured institutions are required to pay assessments to the FDIC at an annual rate of approximately one basis point of insured deposits to fund interest payments on bonds issued by the Financing Corporation, an agency of the federal government established to recapitalize the predecessor to the Savings Association Insurance Fund. These assessments will continue until the Financing Corporation bonds mature in 2017 through 2019.

Under the Federal Deposit Insurance Act (the “FDIA”), the FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

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 Transactions With Affiliates.

Pursuant to Sections 23A and 23B of the Federal Reserve Act and Regulation W, the authority of the Bank to engage in transactions with related parties or “affiliates” or to make loans to insiders is limited. Loan transactions with an “affiliate” generally must be collateralized and certain transactions between the Bank and its “affiliates”, including the sale of assets, the payment of money or the provision of services, must be on terms and conditions that are substantially the same, or at least as favorable to the Bank, as those prevailing for comparable nonaffiliated transactions. In addition, the Bank generally may not purchase securities issued or underwritten by affiliates.

Loans to executive officers, directors or to any person who directly or indirectly, or acting through or in concert with one or more persons, owns, controls or has the power to vote more than 10% of any class of voting securities of a bank, which we refer to as “10% Shareholders”, or to any political or campaign committee the funds or services of which will benefit those executive officers, directors, or 10% Shareholders or which is controlled by those executive officers, directors or 10% Shareholders, are subject to Sections 22(g) and 22(h) of the Federal Reserve Act and their corresponding regulations (Regulation O) and Section 13(k) of the Exchange Act relating to the prohibition on personal loans to executives (which exempts financial institutions in compliance with the insider lending restrictions of Section 22(h) of the Federal Reserve Act). Among other things, these loans must be made on terms substantially the same as those prevailing on transactions made to unaffiliated individuals and certain extensions of credit to those persons must first be approved in advance by a disinterested majority of the entire board of directors. Section 22(h) of the Federal Reserve Act prohibits loans to any of those individuals where the aggregate amount exceeds an amount equal to 15% of an institution’s unimpaired capital and surplus plus an additional 10% of unimpaired capital and surplus in the case of loans that are fully secured by readily marketable collateral, or when the aggregate amount on all of the extensions of credit outstanding to all of these persons would exceed the Bank’s unimpaired capital and unimpaired surplus. Section 22(g) identifies limited circumstances in which the Bank is permitted to extend credit to executive officers.

Community Reinvestment Act.

The Community Reinvestment Act and its corresponding regulations are intended to encourage banks to help meet the credit needs of their service area, including low and moderate income neighborhoods, consistent with the safe and sound operations of the banks. These regulations provide for regulatory assessment of a bank’s record in meeting the credit needs of its service area. Federal banking agencies are required to make public a rating of a bank’s performance under the Community Reinvestment Act. The Federal Reserve considers a bank’s Community Reinvestment Act rating when the bank submits an application to establish banking centers, merge, or acquire the assets and assume the liabilities of another bank. In the case of a financial holding company, the Community Reinvestment Act performance record of all banks involved in the merger or acquisition are reviewed in connection with the filing of an application to acquire ownership or control of shares or assets of a bank or to merge with any other financial holding company. An unsatisfactory record can substantially delay or block the transaction. The Bank received a satisfactory rating on its most recent Community Reinvestment Act assessment.

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 Capital Regulations.

The Federal Reserve and FDIC have adopted risk-based capital adequacy guidelines for bank holding companies and state-chartered banks, respectively. The risk-based capital guidelines are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies, to account for off-balance sheet exposure, to minimize disincentives for holding liquid assets, and to achieve greater consistency in evaluating the capital adequacy of major banks throughout the world. Under these guidelines, assets and off-balance sheet items are assigned to broad risk categories each with designated weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items.

The current guidelines require all bank holding companies and state-chartered banks to maintain a minimum risk-based total capital ratio equal to 8%, of which at least 4% must be Tier I Capital. Tier I Capital, which includes common shareholders’ equity, noncumulative perpetual preferred stock, and a limited amount of cumulative perpetual preferred stock and certain trust preferred securities, less certain goodwill items and other intangible assets, is required to equal at least 4% of risk-weighted assets. The remainder (“Tier II Capital”) may consist of (i) an allowance for loan losses of up to 1.25% of risk-weighted assets, (ii) excess of qualifying perpetual preferred stock, (iii) hybrid capital instruments, (iv) perpetual debt, (v) mandatory convertible securities, and (vi) subordinated debt and intermediate-term preferred stock up to 50% of Tier I Capital. Total capital is the sum of Tier I and Tier II Capital less reciprocal holdings of other banking organizations’ capital instruments, investments in unconsolidated subsidiaries and any other deductions as determined by the appropriate regulator (determined on a case by case basis or as a matter of policy after formal rule making).

In computing total risk-weighted assets, bank and financial holding company assets are given risk-weights of 0%, 20%, 50% and 100%. In addition, certain off-balance sheet items are given similar credit conversion factors to convert them to asset equivalent amounts to which an appropriate risk-weight will apply. Most loans will be assigned to the 100% risk category, except for performing first mortgage loans fully secured by 1- to 4-family and certain multi-family residential property, which carry a 50% risk rating. Most investment securities (including, primarily, general obligation claims on states or other political subdivisions of the United States) will be assigned to the 20% category, except for municipal or state revenue bonds, which have a 50% risk-weight, and direct obligations of the U.S. Treasury or obligations backed by the full faith and credit of the U.S. Government, which have a 0% risk-weight. In covering off-balance sheet items, direct credit substitutes, including general guarantees and standby letters of credit backing financial obligations, are given a 100% conversion factor. Transaction-related contingencies such as bid bonds, standby letters of credit backing non-financial obligations, and undrawncommitments (including commercial credit lines with an initial maturity of more than one year) have a 50% conversion factor. Short-term commercial letters of credit are converted at 20% and certain short-term unconditionally cancelable commitments have a 0% factor.

The federal bank regulatory authorities have also adopted regulations that supplement the risk-based guidelines. These regulations generally require banks and financial holding companies to maintain a minimum level of Tier I Capital to total assets less goodwill of 4% (the “leverage ratio”). The Federal Reserve permits a bank to maintain a minimum 3% leverage ratio if the bank achieves a 1 rating under the CAMELS rating system in its most recent examination, as long as the bank is not experiencing or anticipating significant growth. The CAMELS rating is a non-public system used by bank regulators to rate the strength and weaknesses of financial institutions. The CAMELS rating is comprised of six categories: capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk.

Banking organizations experiencing or anticipating significant growth, as well as those organizations which do not satisfy the criteria described above, will be required to maintain a minimum leverage ratio ranging generally from 4% to 5%. The bank regulators also continue to consider a “tangible Tier I leverage ratio” in evaluating proposals for expansion or new activities.

The tangible Tier I leverage ratio is the ratio of a banking organization’s Tier I Capital, less deductions for intangibles otherwise includable in Tier I Capital, to total tangible assets.

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Federal law and regulations establish a capital-based regulatory scheme designed to promote early intervention for troubled banks and require the FDIC to choose the least expensive resolution of bank failures. The capital-based regulatory framework contains five categories of compliance with regulatory capital requirements, including “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” To qualify as a “well-capitalized” institution, a bank must have a leverage ratio of no less than 5%, a Tier I Capital ratio of no less than 6%, and a total risk-based capital ratio of no less than 10%, and the bank must not be under any order or directive from the appropriate regulatory agency to meet and maintain a specific capital level. Generally, a financial institution must be “well capitalized” before the Federal Reserve will approve an application by a bank holding company to acquire or merge with a bank or bank holding company.

Under the regulations, the applicable agency can treat an institution as if it were in the next lower category if the agency determines (after notice and an opportunity for hearing) that the institution is in an unsafe or unsound condition or is engaging in an unsafe or unsound practice. The degree of regulatory scrutiny of a financial institution will increase, and the permissible activities of the institution will decrease, as it moves downward through the capital categories. Institutions that fall into one of the three undercapitalized categories may be required to (i) submit a capital restoration plan; (ii) raise additional capital; (iii) restrict their growth, deposit interest rates, and other activities; (iv) improve their management; (v) eliminate management fees; or (vi) divest themselves of all or a part of their operations. Financial holding companies controlling financial institutions can be called upon to boost the institutions’ capital and to partially guarantee the institutions’ performance under their capital restoration plans.

It should be noted that the minimum ratios referred to above are merely guidelines and the bank regulators possess the discretionary authority to require higher capital ratios.

As of December 31, 2011, we exceeded the requirements contained in the applicable regulations, policies and directives pertaining to capital adequacy to be classified as “well capitalized”, and are unaware of any material violation or alleged violation of these regulations, policies or directives. Rapid growth, poor loan portfolio performance, or poor earnings performance, or a combination of these factors, could change our capital position in a relatively short period of time, making additional capital infusions necessary.

Prompt Corrective Action.

Immediately upon becoming undercapitalized, a depository institution becomes subject to the provisions of Section 38 of the FDIA, which: (i) restrict payment of capital distributions and management fees; (ii) require that the appropriate federal banking agency monitor the condition of the institution and its efforts to restore its capital; (iii) require submission of a capital restoration plan; (iv) restrict the growth of the institution’s assets; and (v) require prior approval of certain expansion proposals. The appropriate federal banking agency for an undercapitalized institution also may take any number of discretionary supervisory actions if the agency determines that any of these actions is necessary to resolve the problems of the institution at the least possible long-term cost to the deposit insurance fund, subject in certain cases to specified procedures. These discretionary supervisory actions include: (i) requiring the institution to raise additional capital; (ii) restricting transactions with affiliates; (iii) requiring divestiture of the institution or the sale of the institution to a willing purchaser; and (iv) any other supervisory action that the agency deems appropriate. These and additional mandatory and permissive supervisory actions may be taken with respect to significantly undercapitalized and critically undercapitalized institutions.

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Basel III.

On December 17, 2009, the Basel Committee proposed significant changes to bank capital and liquidity regulation, including revisions to the definitions of Tier I Capital and Tier II Capital applicable to Basel III.

The short-term and long-term impact of the new Basel III capital standards and the forthcoming new capital rules to be proposed for non-Basel III U.S. banks is uncertain. As a result of the recent deterioration in the global credit markets and the potential impact of increased liquidity risk and interest rate risk, it is unclear what the short-term impact of the implementation of Basel III may be or what impact a pending alternative standardized approach to Basel III option for non-Basel III U.S. banks may have on the cost and availability of different types of credit and the potential compliance costs of implementing the new capital standards.

On September 12, 2010, the oversight body of the Basel Committee announced a package of reforms which will increase existing capital requirements substantially over the next four years. These capital reforms were endorsed by the G20 at the summit held in Seoul, South Korea in November 2010. On December 20, 2011, the Federal Reserve announced its intention to implement substantially all of the Basel III rules which would generally be applicable to institutions with greater than $50 billion in assets.

 Interstate Banking and Branching.

The Bank Holding Company Act was amended by the Interstate Banking Act. The Interstate Banking Act provides that adequately capitalized and managed financial and bank holding companies are permitted to acquire banks in any state.

State laws prohibiting interstate banking or discriminating against out-of-state banks are preempted. States are not permitted to enact laws opting out of this provision; however, states are allowed to adopt a minimum age restriction requiring that target banks located within the state be in existence for a period of years, up to a maximum of five years, before a bank may be subject to the Interstate Banking Act. The Interstate Banking Act, as amended by the Dodd-Frank Act, establishes deposit caps which prohibit acquisitions that result in the acquiring company controlling 30% or more of the deposits of insured banks and thrift institutions held in the state in which the target maintains a branch or 10% or more of the deposits nationwide. States have the authority to waive the 30% deposit cap. State-level deposit caps are not preempted as long as they do not discriminate against out-of-state companies, and the federal deposit caps apply only to initial entry acquisitions.

Under the Dodd-Frank Act, national banks and state banks are able to establish branches in any state if that state would permit the establishment of the branch by a state bank chartered in that state. Tennessee law permits a state bank to establish a branch of the bank anywhere in the state. Accordingly, under the Dodd-Frank Act, a bank with its headquarters outside the State of Tennessee may establish branches anywhere within Tennessee.

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 Anti-money Laundering.

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”), provides the federal government with additional powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. By way of amendments to the Bank Secrecy Act (“BSA”), the USA PATRIOT Act puts in place measures intended to encourage information sharing among bank regulatory and law enforcement agencies. In addition, certain provisions of the USA PATRIOT Act impose affirmative obligations on a broad range of financial institutions.

Among other requirements, the USA PATRIOT Act and the related Federal Reserve regulations require banks to establish anti-money laundering programs that include, at a minimum:

• internal policies, procedures and controls designed to implement and maintain the savings association’s compliance with all of the requirements of the USA PATRIOT Act, the BSA and related laws and regulations;

• systems and procedures for monitoring and reporting of suspicious transactions and activities;

• a designated compliance officer;

• employee training;

• an independent audit function to test the anti-money laundering program;

• procedures to verify the identity of each customer upon the opening of accounts; and

• heightened due diligence policies, procedures and controls applicable to certain foreign accounts and relationships.

Additionally, the USA PATRIOT Act requires each financial institution to develop a customer identification program (“CIP”) as part of our anti-money laundering program. The key components of the CIP are identification, verification, government list comparison, notice and record retention. The purpose of the CIP is to enable the financial institution to determine the true identity and anticipated account activity of each customer. To make this determination, among other things, the financial institution must collect certain information from customers at the time they enter into the customer relationship with the financial institution. This information must be verified within a reasonable time through documentary and non-documentary methods. Furthermore, all customers must be screened against any CIP-related government lists of known or suspected terrorists. We and our affiliates have adopted policies, procedures and controls to comply with the BSA and the USA PATRIOT Act.

 Regulatory Enforcement Authority.

Federal and state banking laws grant substantial enforcement powers to federal and state banking regulators. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to initiate injunctive actions against banking organizations and institution-affiliated parties. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with regulatory authorities.

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 Federal Home Loan Bank System.

First Advantage Bank is a member of the FHLB of Cincinnati, which is one of 12 regional Federal Home Loan Banks. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from funds deposited by member institutions and proceeds from the sale of consolidated obligations of the FHLB system. It makes loans to members (i.e. advances) in accordance with policies and procedures established by the board of trustees of the FHLB.  As a member of the FHLB of Cincinnati, the Bank is required to own capital stock in the FHLB.

 Privacy.

Under the Gramm-Leach-Bliley Act, federal banking regulators adopted rules limiting the ability of banks and other financial institutions to disclose nonpublic information about consumers to nonaffiliated third parties. The rules require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to nonaffiliated third parties.

 Consumer Laws and Regulations.

The Bank is also subject to other federal and state consumer laws and regulations that are designed to protect consumers in transactions with banks. While the list set forth below is not exhaustive, these laws and regulations include the Truth in Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Check Clearing for the 21st Century Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Fair and Accurate Transactions Act, the Mortgage Disclosure Improvement Act, and the Real Estate Settlement Procedures Act, among others. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits or making loans to such customers. The Bank must comply with the applicable provisions of these consumer protection laws and regulations as part of its ongoing customer relations.

Future Legislative Developments.

Various legislative acts are from time to time introduced in Congress and the Tennessee legislature. This legislation may change banking statutes and the environment in which our banking subsidiary and we operate in substantial and unpredictable ways. We cannot determine the ultimate effect that potential legislation, if enacted, or implementing regulations with respect thereto, would have upon our financial condition or results of operations or that of our banking subsidiary.

Effect of Governmental Monetary Policies.

The commercial banking business in which First Advantage Bank engages is affected not only by general economic conditions, but also by the monetary policies of the Federal Reserve. Changes in the discount rate on member bank borrowing, availability of borrowing at the “discount window,” open market operations, the imposition of changes in reserve requirements against member banks’ deposits and assets of foreign banking centers and the imposition of and changes in reserve requirements against certain borrowings by banks and their affiliates are some of the instruments of monetary policy available to the Federal Reserve. These monetary policies are used in varying combinations to influence overall growth and distributions of bank loans, investments and deposits, and this use may affect interest rates charged on loans or paid on deposits. The monetary policies of the Federal Reserve have had a significant effect on the operating results of commercial banks and are expected to continue to do so in the future. The monetary policies of the Federal Reserve are influenced by various factors, including inflation, unemployment, and short-term and long-term changes in the international trade balance and in the fiscal policies of the U.S. Government. Future monetary policies and the effect of such policies on the future business and earnings of the Bank cannot be predicted.

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Federal Securities Laws

First Advantage Bancorp’s common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934.  First Advantage Bancorp is subject to the information, proxy solicitation, insider trading restrictions and other requirements imposed under the Securities Exchange Act of 1934.

Federal Income Taxation

General.  We report our income on a calendar year basis using the accrual method of accounting. The federal income tax laws apply to us in the same manner as to other corporations with some exceptions, including particularly our reserve for bad debts discussed below. The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to us.  Our federal income tax returns have been either audited or closed under the statute of limitations through tax year 2006.  For 2011, First Advantage Bancorp’s maximum federal income tax rate was 34.0%.

First Advantage Bancorp and the Bank have entered into a tax allocation agreement.  Because First Advantage Bancorp owns 100% of the issued and outstanding capital stock of the Bank, First Advantage Bancorp and the Bank are members of an affiliated group within the meaning of Section 1504(a) of the Internal Revenue Code, of which group First Advantage Bancorp is the common parent corporation.  As a result of this affiliation, the Bank may be included in the filing of a consolidated federal income tax return with First Advantage Bancorp and, if a decision to file a consolidated tax return is made, the parties agree to compensate each other for their individual share of the consolidated tax liability and/or any tax benefits provided by them in the filing of the consolidated federal income tax return.

State Taxation

Tennessee. Tennessee imposes franchise and excise taxes.  The franchise tax ($0.25 per $100) is applied either to apportioned net worth or the value of property owned and used in Tennessee, whichever is greater, as of the close of a company’s fiscal year.  The excise tax (6.5%) is applied to net earnings derived from business transacted in Tennessee.  Under Tennessee regulations, bad debt deductions are deductible from the excise tax.  There have not been any audits of our state tax returns during the past five years.

Any cash dividends, in excess of a certain exempt amount, that would be paid with respect to First Advantage Bancorp common stock to a stockholder (including a partnership and certain other entities) who is a resident of Tennessee will be subject to the Tennessee income tax (6%).  Any distribution by a corporation from earnings according to percentage ownership is considered a dividend, and the definition of a dividend for Tennessee income tax purposes may not be the same as the definition of a dividend for federal income tax purposes.  A corporate distribution may be treated as a dividend for Tennessee tax purposes if it is paid from funds that exceed the corporation’s earned surplus and profits under certain circumstances.

Executive Officers of the Registrant

The following individuals serve as executive officers of the Company and the Bank:

Name	Position
Earl O. Bradley, III	Chief Executive Officer
John T. Halliburton	President
Bonita H. Spiegl	Chief Financial Officer and Corporate Secretary
Jon R. Clouser	Chief Lending Officer – First Advantage Bank
Cindy D. Smith	Chief Operations Officer – First Advantage Bank

Below is information regarding our executive officers who are not also directors.  Ages presented are as of December 31, 2011.

Bonita H. Spieglhas served as Chief Financial Officer and Corporate Secretary of the Company and the Bank since June 2011.  Prior to being appointed Chief Financial Officer, Ms. Spiegl served as Controller of the Bank from November 2007 to June 2011.  Before joining First Advantage Bank, in November 2007, Ms. Spiegl held several positions with 1st Source Bank, located in South Bend, Indiana, including Assistant Vice President and Accounting Manager.  Age 50.

Jon R. Clouserhas served as the Chief Lending Officer of First Advantage Bank since March 2007.  From March 2003 to March 2007, Mr. Clouser was an Executive Vice President of Cumberland Bank and Trust.  Mr. Clouser also served as a Senior Vice President of Old National Bank (formerly Heritage Bank) from 1990 to March 2003.  Age 58

Cindy D. Smithhas served as Chief Operations Officer of First Advantage Bank since March 2011.  Prior to that time, Ms. Smith had served as Vice President of the Bank since September 2010.  Before joining First Advantage Bank, in September 2010, Ms. Smith was the Vice President of sales and marketing, mobile payments for Bling Nation located in Palo Alto, California.  Age 48.

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Item 1A.  RISK FACTORS

An investment in the Company’s common stock is subject to risks inherent to the Company’s business. The material risks and uncertainties that management believes affect the Company are described below. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included or incorporated by reference in this report. The risks and uncertainties described below are not the only ones facing the Company. Additional risks and uncertainties that management is not aware of or focused on or that management currently deems immaterial may also impair the Company’s business operations. This report is qualified in its entirety by these risk factors.

If any of the following risks actually occur, the Company’s financial condition and results of operations could be materially and adversely affected. If this were to happen, the market price of the Company’s common stock could decline significantly, and you could lose all or part of your investment.

Our business may be adversely affected by conditions in the financial markets and economic conditions generally.

Since December 2007 through June 2009, the United States economy was in a recession.  Business activity across a wide range of industries and regions in the United States was greatly reduced and local governments and many businesses are still experiencing serious difficulty due to lower consumer spending and decreased liquidity in the credit markets. Unemployment has continued to remain at high levels.

Market conditions also led to the failure or merger of several prominent financial institutions and numerous regional and community-based financial institutions. These failures, as well as projected future failures, have had a significant negative impact on the capitalization level of the deposit insurance fund of the FDIC, which, in turn, has led to a significant increase in deposit insurance premiums paid by financial institutions.

Our financial performance, in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services we offer, is highly dependent upon the business environment in the markets where we operate, the State of Tennessee and the United States as a whole.

Concerns about the European Union’s sovereign debt crisis have also caused uncertainty for financial markets globally.  Such risks could indirectly affect us by affecting our customers with European businesses or assets denominated in the euro or companies in our market with European businesses or affiliates.

Overall, during 2011, the business environment has been adverse for many households and businesses in the United States and worldwide. While the business environment in Montgomery County, Tennessee, and the markets in which we operate have been less adverse than in the United States as a whole, there can be no assurances that a continued overall economic downturn could eventually have a negative effect in our market area.  Such conditions could adversely affect the credit quality of our loans, results of operations and our financial condition.

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If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings could decrease.

In the event that our loan customers do not repay their loans according to the terms of the loans, and the collateral securing the repayment of these loans is insufficient, or a ready market is not available, to cover any remaining loan balance, we could experience significant loan losses, which could have a material adverse effect on our operating results. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets, if any, serving as collateral for the repayment of our loans.  In determining the amount of our allowance for loan losses, we rely on our loan quality reviews, our experience and our evaluation of economic conditions, among other factors. If our assumptions are incorrect, our allowance for loan losses may not be sufficient to cover probable losses inherent in our loan portfolio, which may require additions to our allowance. Although we are unaware of any specific problems with our loan portfolio that would require any increase in our allowance at the present time, our allowance for loan losses may need to be increased further in the future due to our emphasis on loan growth and on increasing our portfolio of commercial business and commercial real estate loans. Any material additions to our allowance for loan losses would materially decrease our net income.

In addition, our regulators periodically review our allowance for loan losses and may require us to increase our provisions for loan losses or recognize further loan charge-offs. Any increase in our allowance for loan losses or loan charge-offs as required by regulatory authorities could have a material adverse effect on our consolidated results of operations and financial condition.

Our concentrations in construction loans, including speculative construction loans, nonresidential real estate loans and land loans may expose us to increased credit risk.

Speculative construction loans are loans made to builders who have not identified a buyer for the completed property at the time of loan origination.  Although our origination of these types of loans has slowed as the local economy has slowed, over time, we intend to continue to emphasize the origination of these loan types.  These loan types expose a lender to greater risk of non-payment and loss than one-to-four family mortgage loans because the repayment of such loans often depends on the successful operation or sale of the property and the income stream of the borrowers and such loans typically involve larger balances to a single borrower or groups of related borrowers.  In addition, many borrowers of these types of loans have more than one loan outstanding with us so an adverse development with respect to one loan or credit relationship can expose us to significantly greater risk of non-payment and loss.  Furthermore, we may need to increase our allowance for loan losses through future charges to income as the portfolio of these types of loans grows, which would hurt our earnings.  For more information about the credit risk we face, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management.”

Noncore funding represents a large component of our funding base.

In addition to the traditional core deposits, such as demand deposit accounts, interest checking, money market savings and certificates of deposits, we utilize several noncore funding sources, such as Federal Home Loan Bank of Cincinnati advances, the Federal Reserve Discount Window, federal funds purchased and other sources. We utilize these noncore funding sources to fund our ongoing operations and growth. The availability of these noncore funding sources are subject to broad economic conditions and, as such, the pricing on these sources may fluctuate significantly and/or be restricted at any point in time, thus impacting our net interest income, our immediate liquidity and/or our access to additional liquidity. Should the FHLB system deteriorate to the point of not being able to fund future advances to banks, including the Bank, this would place increased pressure on other wholesale funding sources.

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Fluctuations in interest rates may hurt our earnings and asset value.

The Company’s earnings and cash flows are largely dependent upon its net interest income. Net interest income is the difference between interest income earned on interest-earning assets such as loans and securities and interest expense paid on interest-bearing liabilities such as deposits and borrowed funds. Interest rates are highly sensitive to many factors that are beyond the Company’s control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Board of Governors of the Federal Reserve System. Changes in monetary policy, including changes in interest rates, could influence not only the interest the Company receives on loans and securities and the amount of interest it pays on deposits and borrowings, but such changes could also affect (i) the Company’s ability to originate loans and obtain deposits, (ii) the fair value of the Company’s financial assets and liabilities, and (iii) the average duration of the Company’s mortgage-backed securities portfolio. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, the Company’s net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.

Although management believes it has implemented effective asset and liability management strategies to reduce the potential effects of changes in interest rates on the Company’s results of operations, any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on the Company’s financial condition and results of operations.

Our balance sheet leverage transactions are subject to reinvestment and interest rate risks.

On April 30, 2008 we entered into two balance sheet leverage transactions, utilizing structured repurchase agreements, which totaled $35 million.  $25 million of the borrowings have call options ranging from two to three years after origination, with final maturities ranging from five to ten years if they are not called.  Collateral for the borrowings consists of U. S. Agency pass-through Mortgage Backed Securities (the “Securities”).  Borrowing rates as of the report date are substantially lower than when the leverage transaction was originated.  If borrowing rates remain at or near current low levels for two to three years it is possible that the structured repurchase agreement borrowings will not be called and the bank will be paying above market rates for borrowings for an extended period of time.  Additionally, the recent decrease in mortgage rates has increased the amount of mortgages being refinanced.  Prepayment of the mortgages that are collateral for the securities used in the structured repurchase agreement could require us to substitute additional collateral if the minimum collateral level is not maintained.   The Bank may not have suitable collateral in the portfolio to substitute at the time and would have to purchase additional securities at market prices.  Additional purchases would likely be reinvested in much lower yielding investments.  Both factors discussed here could contribute to a mismatch in terms of the effective duration of both the borrowings and the Securities and would negatively impact the anticipated spread on the leverage transaction.

We may be adversely affected by the soundness of other financial institutions.

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. The Company has exposure to many different industries and counterparties, and routinely executes transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of these transactions expose the Company to credit risk in the event of a default by a counterparty or client. In addition, the Company’s credit risk may be exacerbated when the collateral held by the Company cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit due to the Company. Any such losses could have a material adverse effect on the Company’s financial condition and results of operations.

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New lines of business or new products and services may subject us to additional risks.

From time to time, the Company may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services the Company may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of the Company’s system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on the Company’s business, results of operations and financial condition.

A further downturn in the local economy or a continued decline in real estate values could hurt our profits.

A large majority of our loans are secured by real estate in Montgomery County, Tennessee, and the surrounding areas.  As a result of this concentration, a further downturn in the local economy could significantly increase nonperforming loans, which would hurt our profits.  Historically, Fort Campbell, a nearby U.S. Army installation, has played a significant role in the economy of our primary market area.  Future deployments would dampen economic activity. Furthermore, a continued decline in real estate values could lead to some of our mortgage loans becoming inadequately collateralized, which would expose us to greater risk of loss.  Additionally, a decline in real estate values could hurt our portfolio of construction loans, nonresidential real estate loans, and land loans and could reduce our ability to originate such loans.  For a discussion of our primary market area, see Item 1, “Business—Market Area.”

Strong competition within our primary market area could hurt our profits and slow growth.

We face intense competition both in making loans and attracting deposits.  This competition has made it more difficult for us to make new loans and attract deposits.  Price competition for loans and deposits might result in us earning less on our loans and paying more on our deposits, which would reduce net interest income.  Competition also makes it more difficult to grow loans and deposits.  Some of the institutions with which we compete have substantially greater resources and lending limits than we have and may offer services that we do not provide.  We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry.  Our profitability depends upon our continued ability to compete successfully in our primary market area.  See Item 1, “Business—Market Area” and “Business—Competition” for more information about our primary market area and the competition we face.

We operate in a highly regulated environment and we may be adversely affected by changes in laws and regulations.

The Company and the Bank are subject to extensive regulation, supervision and examination by the Federal Reserve, the TDFI and the FDIC.  Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses.  Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations.

Recently enacted regulatory reform may have a material impact on our operations.

The Dodd-Frank Act, enacted in July 2010, instituted major changes to the banking and financial institutions regulatory regimes in light of the recent performance of and government intervention in the financial services sector. Other changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect the Company in substantial and unpredictable ways. Such changes could subject the Company to additional costs, limit the types of financial services and products the Company may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things. Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on the Company’s business, financial condition and results of operations.The full impact of the Dodd-Frank Act on our business and operations will not be known for years until regulations implementing the statute are written and adopted. However, the Dodd-Frank Act may have a material impact on our operations, particularly through increased regulatory burden and compliance costs.

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Increased and/or special FDIC assessments will hurt our earnings.

The recent economic recession has caused a high level of bank failures, which has dramatically increased Federal Deposit Insurance Corporation resolution costs and led to a significant reduction in the balance of the Deposit Insurance Fund. As a result, the Federal Deposit Insurance Corporation has significantly increased the initial base assessment rates paid by financial institutions for deposit insurance. Increases in the base assessment rate have increased our deposit insurance costs and negatively impacted our earnings. In addition, in May 2009, the Federal Deposit Insurance Corporation imposed a special assessment on all insured institutions. Our special assessment, which was reflected in earnings for the quarter ended June 30, 2009, was $536,000. In lieu of imposing an additional special assessment, the Federal Deposit Insurance Corporation required all institutions to prepay their assessments for all of 2010, 2011 and 2012, which for us totaled $1.1 million. Additional increases in the base assessment rate or additional special assessments would negatively impact our earnings.

Our information systems may experience an interruption or breach in security.

The Company relies heavily on communications and information systems to conduct its business. Any failure, interruption or breach in security of these systems could result in failures or disruptions in the Company’s customer relationship management, general ledger, deposit, loan and other systems. While the Company has policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of its information systems, there can be no assurance that any such failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions or security breaches of the Company’s information systems could damage the Company’s reputation, result in a loss of customer business, subject the Company to additional regulatory scrutiny, or expose the Company to civil litigation and possible financial liability, any of which could have a material adverse effect on the Company’s financial condition and results of operations.

We continually encounter technological change.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. The Company’s future success depends, in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Company’s operations. Many of the Company’s competitors have substantially greater resources to invest in technological improvements. The Company may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on the Company’s business and, in turn, the Company’s financial condition and results of operations.

Our operations rely on certain external vendors.

The Company is reliant upon certain external vendors to provide products and services necessary to maintain day-to-day operations of the Company. Accordingly, the Company’s operations are exposed to risk that these vendors will not perform in accordance with the contracted arrangements under service level agreements. The failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements could be disruptive to the Company’s operations, which could have a material adverse impact on the Company’s business and, in turn, the Company’s financial condition and results of operations.

Even though our common stock is currently traded on the Nasdaq Stock Market’s Global Market, it has less liquidity than many other stocks quoted on a national securities exchange.

The trading volume in our common stock on the Nasdaq Global Market has been relatively low when compared with larger companies listed on the Nasdaq Global Market or other stock exchanges. Because of this, it may be more difficult for shareholders to sell a substantial number of shares for the same price at which shareholders could sell a smaller number of shares.

We cannot predict the effect, if any, that future sales of our common stock in the market, or the availability of shares of common stock for sale in the market, will have on the market price of our common stock. We can give no assurance that sales of substantial amounts of common stock in the market, or the potential for large amounts of sales in the market, would not cause the price of our common stock to decline or impair our future ability to raise capital through sales of our common stock.

The market price of our common stock has fluctuated in the past, and may fluctuate in the future. These fluctuations may be unrelated to our performance. General market or industry price declines or overall market volatility in the future could adversely affect the price of our common stock, and the current market price may not be indicative of future market prices.

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We may not continue to pay dividends on our common stock in the future.

Holders of First Advantage Bancorp common stock are only entitled to receive such dividends as its board of directors may declare out of funds legally available for such payments. Although First Advantage has established a pattern of declaring quarterly cash dividends on its common stock, it is not required to do so and may reduce or eliminate its common stock dividend in the future. This could adversely affect the market price of First Advantage Bancorp’s common stock. Also, First Advantage Bancorp is a bank holding company, and its ability to declare and pay dividends is dependent on certain federal regulatory considerations.

A substantial source of the Company’s income from which it can pay dividends is the receipt of dividends from the Bank. The availability of the Bank to pay dividends to the Company is limited by applicable Tennessee law, which provides that the Bank may not declare dividends in any calendar year that exceeds the total of its net income of that year combined with its retained net income of the preceding two years without the prior approval of the TDFI.  It is also possible, depending upon the financial condition of the Bank, and other factors, that the applicable regulatory authorities could assert that payment of dividends or other payments is an unsafe or unsound practice. In the event that the Bank is unable to pay dividends to the Company, the Company may not be able to pay dividends on its common stock.

An investment in our common stock is not an insured deposit.

The Company’s common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity. Investment in the Company’s common stock is inherently risky for the reasons described in this “Risk Factors” section and elsewhere in this report and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire the Company’s common stock, you could lose some or all of your investment.

Financial services companies depend on the accuracy and completeness of information about customers and counterparties and material misrepresentations could negatively impact our financial condition and results of operations.

In deciding whether to extend credit or enter into other transactions, the Company may rely on information furnished by or on behalf of customers and counterparties, including financial statements, credit reports and other financial information. The Company may also rely on representations of those customers, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports or other financial information could have a material adverse impact on the Company’s business and, in turn, the Company’s financial condition and results of operations.

Consumers may decide not to use banks to complete their financial transactions.

Technology and other changes are allowing parties to complete financial transactions that historically have involved banks through alternative methods. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts or mutual funds. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost deposits as a source of funds could have a material adverse effect on the Company’s financial condition and results of operations.

The recent repeal of federal prohibitions on payment of interest on demand deposits could increase our interest expense.

All federal prohibitions on the ability of financial institutions to pay interest on demand deposit accounts were repealed as part of the Dodd-Frank Act. As a result, beginning on July 21, 2011, financial institutions could commence offering interest on demand deposits to compete for clients. The Company does not yet know what interest rates other institutions may offer. The Company’s interest expense will increase and its net interest margin will decrease if it begins offering interest on demand deposits to attract additional customers or maintain current customers, which could have a material adverse effect on the Company’s business, financial condition and results of operations.

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Item 1B.  UNRESOLVED STAFF COMMENTS

None.

Item 2.    PROPERTIES

We conduct our business through our main office and branch offices.  The following table sets forth certain information relating to these facilities as of December 31, 2011.

Location	Year Opened	Approximate Square Footage	Status
Main Office: 1430 Madison Street Clarksville, Tennessee 37040	2006	17,000	Owned
Branch Offices: Tradewinds Branch 1929 Madison Street Clarksville, Tennessee 37043	2007	2,300	Owned
St. Bethlehem Branch 2070 Wilma Rudolph Boulevard Clarksville, Tennessee  37043	2009	4,000	Owned
North Clarksville Branch 1800 Ft. Campbell Boulevard Clarksville, Tennessee 37042	1996	8,000	Owned
Riverbend Branch (1) 1265 Highway 48 Clarksville, Tennessee  37040	2009	2,100	Leased
Mortgage Office 933-F Tracy Lane Clarksville, Tennessee  37040	2010	1,277	Leased
ATM Site 1193 & 1195 Ft. Campbell Boulevard Clarksville, Tennessee 37042	1984	N/A	Owned
Other Properties: Commercial Lot (2) Pleasant View, Tennessee 37040	N/A	N/A	Owned
St. Bethlehem Branch (2) 2141 Wilma Rudolph Boulevard Clarksville, Tennessee 37040	1985	4,600	Owned
Downtown (Drive-Thru Only) (2) 224 N. 2nd Street Clarksville, Tennessee 37042	1995	600	Owned
Blue Hole Lodge (3) 661 Dunbar Cave Road Clarksville, Tennessee 37043	N/A	N/A	Owned

_________________________________________________________________

(1)  The Riverbend Branch opened in March 2009.  The premise is leased from a related party (a partnership whose partners include one director of the Company).

(2)  Former branch office location.

(3) See Item 1, “Business—Subsidiaries” for more information about this property.

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Item 3.  LEGAL PROCEEDINGS

Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business.  We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

Item 4.  MINE SAFETY DISCLOSURES

None.

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for Common Equity and Related Stockholder Matters

The Company’s common stock is listed on the Nasdaq Global Market (“Nasdaq”) under the trading symbol “FABK.”   The following table sets forth the high and low intra-day sales prices of First Advantage Bancorp’s common stock for each quarter of 2011 and 2010, as reported by Nasdaq, and the quarterly cash dividends paid per share.

					Cash
					Dividends
2011	High		Low		Paid
First Quarter	$	13.82	$	12.00	$	0.05
Second Quarter		13.89		12.17		0.05
Third Quarter		13.12		11.96		0.05
Fourth Quarter		13.01		12.55		0.05
					Cash
					Dividends
2010	High		Low		Paid
First Quarter	$	10.75	$	10.20	$	0.05
Second Quarter		10.98		10.41		0.05
Third Quarter		10.87		10.12		0.05
Fourth Quarter		12.20		10.65		0.05

As of December 31, 2011, there were 4,459,135 shares of the Company’s common stock issued and 4,038,260 shares of the Company’s common stock outstanding.  Such outstanding shares were held by approximately 605 holders of record as of December 31, 2011.  The closing price per share of the Company’s common stock on December 30, 2011, the last trading day of the Company’s fiscal year, was $12.87.

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Purchases of Equity Securities

The Company’s board of directors has authorized four stock repurchase programs.  The stock repurchase programs allow the Company to proactively manage its capital position and return excess capital to shareholders.  Under the first stock repurchase program, which was approved on December 17, 2008, the Company was authorized to repurchase up to 263,234 shares or 5.0%, of the Company’s issued common stock, through open market purchases or privately negotiated transactions, from time to time, depending on market conditions and other factors.  The first stock repurchase program was completed during the first quarter of 2010.  On March 4, 2010, a second repurchase program was approved which authorized the repurchase of up to 252,319 or 5.0% of the Company’s issued common stock, through open market purchases or privately negotiated transactions, from time to time, depending on market conditions and other factors.  The second stock repurchase program was completed during the third quarter of 2010.  On June 9, 2010, a third repurchase program was approved which authorized the repurchase of up to 240,524 or 5.0% of the Company’s issued common stock, through open market purchases or privately negotiated transactions, from time to time, depending on market conditions and other factors. The third stock repurchase program was completed during the fourth quarter of 2011.  On November 17,  2010, a fourth repurchase program was approved which authorized the repurchase of up to 231,624 or 5.0% of the Company’s issued common stock, through open market purchases or privately negotiated transactions, from time to time, depending on market conditions and other factors. On February 15, 2011, a fifth repurchase program was approved which authorized the repurchase of up to 220,706 or 5.0% of the Company’s issued common stock, through open market purchases or privately negotiated transactions, from time to time, depending on market conditions and other factors.  There is no guarantee as to the exact number of shares to be repurchased by the Company.

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

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs		Maximum Number of Shares That May Yet Be Purchased Under the Programs at the End of the Period
October 1, 2011 to October 31, 2011		10,100		12.748		10,100		229,517
November 1, 2011 to November 30, 2011		40,000		12.750		40,000		189,517
December 1, 2011 to December 31, 2011		41,700		12.743		41,700		147,817
Total		91,800		12.746		91,800		147,817

27

Item 6.   SELECTED FINANCIAL DATA

	At December 31,
	2011		2010		2009		2008		2007
	(Dollars in thousands)
Financial Condition Data:
Total assets	$	366,149	$	345,252	$	344,224	$	338,404	$	253,403
Cash and due from banks		7,651		4,151		9,204		7,991		3,209
Interest-bearing demand deposits with banks		1,680		1,387		1,686		4,243		970
Federal funds sold		1,425		2,250		975		9		4,897
Available-for-sale securities, fair value		70,279		74,214		98,736		129,076		112,817
Loans held for sale		5,509		3,155		2,265		866		1,867
Loans, net		259,534		238,346		211,137		176,412		115,959
Deposits		232,584		219,504		216,240		186,807		169,854
Federal Home Loan Bank advances and   borrowings at other banks		58,500		48,000		48,000		73,550		-
Shareholders' equity		66,475		66,727		70,526		70,261		79,505
	For the Year Ended December 31,
		2011		2010		2009		2008		2007
Operating Data:	(Dollars in thousands)
Interest and dividend income	$	17,655	$	17,571	$	17,232	$	17,285	$	13,253
Interest expense		3,903		4,999		6,367		6,602		6,016
Net interest income		13,752		12,572		10,865		10,683		7,237
Provision (credit) for loan losses		967		1,334		868		685		(364)
Net interest income after provision   (credit) for loan losses		12,785		11,238		9,997		9,998		7,601
Non-interest income (1) (2) (3)		2,522		2,738		1,649		(13,796)		1,987
Non-interest expense		12,286		11,312		11,151		10,145		10,060
Income (loss) before provision   (credit) for income taxes		3,021		2,664		495		(13,943)		(472)
Provision (credit) for income taxes		1,121		968		135		(5,848)		(217)
Net income (loss)	$	1,900	$	1,696	$	360	$	(8,095)	$	(255)
Basic earnings per common share	$	0.47	$	0.40	$	0.08	$	(1.73)		N/A
Diluted earnings per common share	$	0.44	$	0.39	$	0.08	$	(1.73)		N/A

(1)   In 2007, includes net loss on sale of securities of $301,000 and other-than-temporary impairment charges of $282,000.

(2)   In 2008, includes net loss on sale of securities of $2.7 million and other-than-temporary impairment charges of $13.6 million.

(3)   In 2009, includes other-than-temporary impairment charges of $1.1 million.

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	At or for the Year Ended December 31,
Selected Financial Ratios and Other Data	2011		2010		2009		2008		2007
Performance Ratios:
Return on average assets	0.55	%	0.49	%	0.10	%	(2.60)	%	(0.12)	%
Return on average equity	2.82		2.48		0.51		(10.65)		(0.69)
Interest rate spread (1)	3.79		3.41		2.86		2.86		2.76
Net interest margin (2)	4.15		3.84		3.37		3.60		3.45
Other expenses to average assets	3.54		3.27		3.24		3.26		4.56
Dividend payout ratio (3)	45.50		51.30		250.00		N/M		-
Efficiency ratio (4)	75.49		73.89		89.11		(325.89)		109.06
Average interest-earning assets to average interest-bearing liabilities	1.31	x	1.28	x	1.26	x	1.33	x	1.24	x
Average equity to average assets	19.41	%	19.82	%	20.38	%	24.41	%	16.67	%
Capital Ratios (Bank only):
Tangible capital	13.88	%	13.89	%	13.08	%	12.86	%	20.98	%
Core capital	13.88		13.89		13.08		12.86		20.98
Total risk-based capital	19.03		19.24		19.87		22.49		35.31
Asset Quality Ratios:
Allowance for loan losses as a percent of nonperforming loans	154.81	%	122.24	%	200.50	%	262.00	%	180.62	%
Net charge-offs to average outstanding loans during the period	0.12		0.22		0.12		0.01		0.14
Non-performing loans as a percent of total loans	1.08		1.23		0.66		0.46		0.71
Non-performing assets as a percent of total assets	1.16		0.90		0.50		0.25		0.33
Other Data:
Number of offices (5)	5		5		5		5		5
Number of deposit accounts	13,406		13,270		12,872		12,052		11,907
Number of loans	1,857		1,905		1,823		1,587		1,395

_______________

(1)   Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost on average interest-bearing liabilities.

(2)   Represents net interest income as a percent of average interest-earning assets.

(3)   Represents dividends declared per common share divided by diluted earnings per common share.

(4)   Represents other expenses divided by the sum of net interest income and other income.

(5)   For 2007 and 2008 includes a limited service office with drive-thru and ATM services only.

29

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements and Factors that Could Affect Future Results

Certain statements contained in this Annual Report on Form 10-K that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in the Company’s future filings with the SEC, in press releases, and in oral and written statements made by or with the approval of the Company that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations of First Advantage Bancorp or its management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believes”, “anticipates”, “expects”, “intends”, “targeted”, “continue”, “remain”, “will”, “should”, “may” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

· Local, regional, national and international economic conditions and the impact they may have on the Company and its customers and the Company’s assessment of that impact.

· Volatility and disruption in national and international financial markets.

· Government intervention in the U.S. financial system.

· Changes in the level of non-performing assets and charge-offs.

· Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.

· The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve.

· Inflation, interest rate, securities market and monetary fluctuations.

· The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company and its subsidiaries must comply.

· Political instability.

· Acts of God or of war or terrorism.

· The timely development and acceptance of new products and services and perceived overall value of these products and services by users.

· Changes in consumer spending, borrowings and savings habits.

· Changes in the financial performance and/or condition of the Company’s borrowers.

· Technological changes.

· Acquisitions and integration of acquired businesses.

· The ability to increase market share and control expenses.

· Changes in the competitive environment among financial holding companies and other financial service providers.

· The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters.

· Changes in the Company’s organization, compensation and benefit plans.

· The costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews.

Forward-looking statements speak only as of the date on which such statements are made. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.

30

Overview

The following discussion and analysis presents the more significant factors affecting the Company’s financial condition as of December 31, 2011 and 2010 and results of operations for each of the years in the two-year period ended December 31, 2011. This discussion and analysis should be read in conjunction with the Company’s consolidated financial statements, notes thereto and other financial information appearing elsewhere in this report.

Dollar amounts in tables are stated in thousands, except per share amounts.

Income.  Our primary source of pre-tax income is net interest income. Net interest income is the difference between interest income, which is the income that we earn on our loans and investments, and interest expense, which is the interest that we pay on our deposits and borrowings. Other significant sources of pre-tax income are service charges (mostly from service charges on deposit accounts and loan servicing fees), fees from sale of mortgage loans originated for sale in the secondary market, and commissions on sales of securities and insurance products. We also recognize income and loss from the sale of securities.

Allowance for Loan Losses. The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings.

Expenses.  The non-interest expenses we incur in operating our business consist of salaries and employee benefits expenses, occupancy expenses, federal deposit insurance premiums, data processing expenses and other miscellaneous expenses.

Salaries and employee benefits consist primarily of: salaries and wages paid to our employees; payroll taxes; and expenses for health insurance, retirement plans and other employee benefits.  We recognize additional annual employee compensation expenses related to the equity incentive plan which was approved by shareholders and adopted in 2008.

Occupancy expenses, which are the fixed and variable costs of buildings and equipment, consist primarily of depreciation charges, furniture and equipment expenses, maintenance, real estate taxes and costs of utilities. Depreciation of premises and equipment is computed using the straight-line method based on the useful lives of the related assets, which range from three to forty years.

Data processing expenses are the fees we pay to third parties for processing customer information, deposits and loans.

Federal deposit insurance premiums are payments we make to the Federal Deposit Insurance Corporation for insurance of our deposit accounts.

Other expenses include expenses for professional services, advertising, office supplies, postage, telephone, insurance, regulatory assessments and other miscellaneous operating expenses.

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Critical Accounting Policies

The accounting and reporting policies followed by the Company conform, in all material respects, to accounting principles generally accepted in the United States and to general practices within the financial services industry. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While the Company bases estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates.

The Company considers accounting estimates to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on the Company’s financial statements.

Allowance for Loan Losses. The allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. 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 the 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 collectability of the loan portfolio. Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic or other conditions differ substantially from the assumptions used in making the evaluation. In addition, the TDFI and FDIC, as an integral part of their examination process, periodically reviews our allowance for loan losses and may require us to recognize adjustments to the allowance based on their judgments about information available to them at the time of an examination. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings. See note 5 to the consolidated financial statements beginning on page F-1 of this annual report.

Other-Than-Temporary Impairment. Management periodically evaluates the Company’s investment securities portfolio for other-than-temporary impairment.  If a security is considered to be other-than-temporarily impaired, the related unrealized loss is charged to earnings, and a new cost basis is established.  Factors considered include the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to period-end, and forecasted performance of the security issuer.  Impairment is considered other-than-temporary unless the Company has both the intent and ability to hold the security until the fair value recovers and evidence supporting the recovery outweighs evidence to the contrary.  However, for equity securities, which typically do not have a contractual maturity with a specified cash flow on which to rely, the ability to hold an equity security indefinitely, by itself, does not allow for avoidance of other-than-temporary impairment.  Future changes in management’s assessment of other-than-temporary impairment on its securities could result in significant charges to earnings in future periods.  See note 4 to the consolidated financial statements beginning on page F-1 of this annual report.

Balance Sheet Analysis

Loans. Our primary lending activity is the origination of loans secured by real estate. We originate one-to-four family mortgage loans, multi-family loans, nonresidential real estate loans, commercial business loans and construction loans. To a lesser extent, we originate land loans and consumer loans.

Nonresidential real estate loans were the largest segment of our loan portfolio as of December 31, 2011.  These loans totaled $98.3 million, or 37.3% of total loans, at December 31, 2011. At December 31, 2010, these loans totaled $77.1 million, or 31.9% of total loans.  The balance of nonresidential real estate loans increased during the year due to our emphasis on growing loans in this category, particularly with respect to small businesses.   Also, during the fourth quarter of 2011 the Bank purchased approximately $14.0 million of performing loans from another financial institution.   All of the loans purchased were within our market area and met the Bank’s strict underwriting guidelines for loan-to-value and debt service coverage.

At December 31, 2011, one-to-four family loans totaled $44.8 million, or 17.0% of total loans, compared to $43.7 million, or 18.1% of total loans at December 31, 2010.  The balance of one-to-four family loans increased during the year primarily due to the migration of maturing one-to-four family constructions 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.   The Bank also occasionally originates and retains one-to-four family loans for specific customers.

Our construction loan portfolio consists primarily of residential construction loans, including speculative residential construction loans. Construction loans totaled $27.7 million, or 10.6% of total loans, at December 31, 2011. At December 31, 2010, these loans totaled $26.7 million, or 11.0% of total loans.

Land loans totaled $25.4 million, or 9.6% of total loans, at December 31, 2011, compared to $26.4 million, or 10.9% of total loans at December 31, 2010.  These loans are primarily secured by vacant land to be improved for residential development.

Multi-family real estate loans totaled $16.7 million, or 6.3% of total loans at December 31, 2011. At December 31, 2010, these loans totaled $13.6 million, or 5.6% of gross loans.

Consumer loans totaled $22.4 million, or 8.5% of total loans, at December 31, 2011 compared to $22.0 million, or 9.1% of gross loans at December 31, 2010.

Commercial business loans totaled $28.5 million, or 10.8% of total loans at December 31, 2011 compared to $32.5 million, or 13.4% of total loans at December 31, 2010.

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The following table sets forth the composition of our loan portfolio at the dates indicated.

	At December 31,
	2011						2010						2009
	Amount			Percent			Amount			Percent			Amount			Percent
	(Dollars in thousands)
Real estate loans:
Permanent loans:
One-to-four family	$	44,813			17.0	%	$	43,695			18.1	%	$	44,582			20.8	%
Multi-family		16,695			6.3			13,592			5.6			13,695			6.4
Nonresidential		98,278			37.3			77,089			31.9			63,910			29.9
Construction loans:
One-to-four family		18,618			7.1			20,373			8.4			13,880			6.5
Multi-family		2,357			0.9			357			0.1			3,060			1.4
Nonresidential		6,753			2.6			5,929			2.5			9,941			4.6
Land loans		25,409			9.6			26,394			10.9			20,849			9.7
Total real estate loans		212,923			80.7			187,429			77.5			169,917			79.3
Consumer:
Home equity loans and lines of credit		19,722			7.5			18,761			7.7			16,445			7.7
Auto loans		429			0.2			639			0.3			850			0.4
Deposit loans		321			0.1			377			0.2			257			0.1
Other		1,905			0.7			2,240			0.9			2,339			1.1
Total consumer loans		22,377			8.5			22,017			9.1			19,891			9.3
Commercial loans		28,462			10.8			32,460			13.4			24,069			11.4
Total loans		263,762			100.0	%		241,906			100.0	%		213,877			100.0	%
Allowance for loan losses		(4,316	)					(3,649	)					(2,813	)
Net deferred loan costs		88						89						73
Loans receivable, net	$	259,534					$	238,346					$	211,137

	At December 31,
	2008					2007
	Amount		Percent			Amount		Percent
	(Dollars in thousands)
Real estate loans:
Permanent loans:
One-to-four family	$	38,210		21.4	%	$	31,639		26.9	%
Multi-family		10,816		6.1			5,043		4.3
Nonresidential		54,375		30.4			27,186		23.1
Construction loans:
One-to-four family		16,769		9.4			13,019		11.1
Multi-family		2,060		1.1			3,408		2.9
Nonresidential		5,410		3.0			4,282		3.6
Land loans		14,216		8.0			11,539		9.8
Total real estate loans		141,856		79.4			96,116		81.7
Consumer:
Home equity loans and lines of credit		13,575		7.6			7,686		6.5
Auto loans		984		0.6			505		0.4
Deposit loans		255		0.1			776		0.7
Other		1,938		1.1			1,134		1.0
Total consumer loans		16,752		9.4			10,101		8.6
Commercial loans		20,105		11.2			11,412		9.7
Total loans		178,713		100.0	%		117,629		100.0	%
Allowance for loan losses		(2,175)					(1,510)
Net deferred loan costs		(126)					(160)
Loans receivable, net	$	176,412				$	115,959

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Loan Maturity

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

	At December 31, 2011
			Multi-
			Family and
			Nonresidential
	One-to-Four		Real Estate										Total
	Family		Loans		Construction		Land		Consumer		Commercial		Loans
	(Dollars in thousands)
Amounts due in:
One year or less	$	9,942	$	12,231	$	25,977	$	14,289	$	11,637	$	17,041	$	91,117
More than one year to three years		10,457		56,586		1,751		7,610		1,645		7,651		85,700
More than three years to five years		11,244		40,319		-		3,032		1,011		3,448		59,054
More than five years to fifteen years		6,675		5,837		-		478		8,084		322		21,396
More than fifteen years		6,495		-		-		-		-		-		6,495
Total	$	44,813	$	114,973	$	27,728	$	25,409	$	22,377	$	28,462	$	263,762

Fixed vs. Adjustable Rate Loans

The following table sets forth the dollar amount of all loans at December 31, 2011 that are due after December 31, 2012, and have either fixed interest rates or floating or adjustable interest rates. The amounts shown below exclude unearned loan origination fees.

			Floating or
	Fixed Rates		Adjustable Rates		Total
	(Dollars in thousands)
One-to-four family	$	33,873	$	998	$	34,871
Multi-family and nonresidential		93,484		9,258		102,742
Construction		213		1,538		1,751
Land		3,045		8,076		11,120
Consumer		3,293		7,446		10,740
Commercial		10,061		1,360		11,421
Total	$	143,969	$	28,676	$	172,645

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

34

Securities. Our securities portfolio consists primarily of U.S. government callable federal agency bonds, U.S. government agency mortgage-backed securities, and obligations of states and political subdivisions with a relatively smaller investment in collateralized mortgage obligations and other securities.  For the year ended December 31, 2011 the amortized cost of our securities decreased by $4.3 million, as excess funds were utilized to fund loan growth in lieu of investment funding.

Our callable securities, with a fair value of $17.0 million at December 31, 2011, consist of U.S. government agency bonds and securities that are callable within one year, state and political subdivisions bonds that are callable beginning in periods ranging from one to ten years, and corporate debt securities that are callable beginning in periods ranging from one to three years.

	2011				2010				2009
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
U. S. Treasury	$	4,692	$	6,075	$	4,730	$	6,093	$	4,765	$	6,061
U. S. Government agencies		8,000		8,022		7,999		7,918		13,879		14,298
Mortgage-backed securities		40,097		42,896		43,748		46,349		62,825		65,086
Collateralized mortgage obligations		2,611		2,490		3,993		4,080		4,795		4,710
State and political subdivisions		10,163		10,619		9,555		9,717		8,466		8,554
Corporate debt securities		2		177		18		57		30		30
Total	$	65,565	$	70,279	$	70,043	$	74,214	$	94,760	$	98,739

The following table sets forth the stated maturities and weighted average yields of our investment securities at December 31, 2011. Certain mortgage-backed securities have adjustable interest rates and will reprice annually within the various maturity ranges. These repricing schedules are not reflected in the table below.

						More than					More than
	One Year					One Year to					Five Years to					More than
	or Less					Five Years					Ten Years					Ten Years					Total
			Weighted					Weighted					Weighted					Weighted					Weighted
	Carrying		Average			Carrying		Average			Carrying		Average			Carrying		Average			Carrying		Average
	Value		Yield			Value		Yield			Value		Yield			Value		Yield			Value		Yield
	(Dollars in thousands)
U.S. government and federal agencies	$	-		-	%	$	6,075		8.01	%	$	-		-	%	$	8,022		3.13	%	$	14,097		5.23	%
State and political subdivisions		-		-			1,108		3.85			2,811		3.90			6,700		3.55			10,619		3.71
Mortgage-backed securities		-		-			172		5.87			453		5.31			42,271		4.47			42,896		4.49
Collateralized mortgage obligations		-		-			-		-			-		-			2,490		2.75			2,490		2.75
Corporate debt securities		-		-			-		-			-		-			177		-			177		-
Total	$	-		-	%	$	7,355		7.33	%	$	3,264		4.10	%	$	59,660		4.10	%	$	70,279		4.45	%

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Deposits. Deposit accounts, primarily obtained from individuals and businesses within our local market area, are our primary source of funds for lending and investment. Our deposit accounts are comprised of non-interest-bearing accounts, interest-bearing savings accounts, checking accounts, money market accounts and certificates of deposit.

The following table sets forth the balances of our deposit products at the dates indicated.

	At December 31,
	2011		2010		2009
	(Dollars in thousands)
Non-interest bearing checking accounts	$	28,062	$	19,681	$	19,426
Interest bearing accounts:
Savings		44,003		41,770		36,581
Checking		59,430		58,753		55,895
Money market		30,927		20,336		17,230
Certificates of deposit		70,162		78,964		87,108
Total	$	232,584	$	219,504	$	216,240

The following table indicates the amount of jumbo certificates of deposit by time remaining until maturity as of December 31, 2011.  Jumbo certificates of deposit require minimum deposits of $100,000.

Maturity Period	Amount
At December 31, 2011	(Dollars in thousands)
Three months or less	$	6,119
Over three through six months		7,970
Over six through twelve months		7,936
Over twelve months		6,917
Total	$	28,942

Borrowings.

Short term borrowings.  Short-term borrowings consist of Federal Home Loan Bank (“FHLB”) overnight advances and federal funds purchased and securities sold under agreements to repurchase.  Federal funds purchased are short-term borrowings that typically mature within one to ninety days and reprice daily.  As of December 31, 2011 and 2010 the balances of short-term advances from FHLB were $10,500  and $-0-, respectively.  Securities sold under agreements to repurchase consist of customer funds that are invested overnight in investment securities.   The following table shows the distribution of short-term borrowings, the weighted average interest rates thereon and the maximum month-end balance at the end of each of the last two years.

FHLB Advances and other borrowings
(Dollars in thousands)
FHLB Short Term Advances	December 31, 2011			December 31, 2010
Balance at Year End	$	10,500		$	-
Weighted Avg Rate at Year End		0.049	%		-	%
Average Balance During the Year		682			-
Weighted Avg Rate During the Year		0.073	%		-	%
Maximum month-end Balance		10,500			-
Fed Funds Purchased
Balance at Year End	$	-		$	-
Weighted Avg Rate at Year End		-			-
Average Balance During the Year		66			73
Weighted Avg Rate During the Year		1.27	%		1.18	%
Maximum month-end Balance		-			-
Securities Sold Under Agreements to Repurchase
Balance at Year End	$	4,176		$	6,215
Weighted Avg Rate at Year End		0.74	%		1.49	%
Average Balance During the Year		5,475			6,250
Weighted Avg Rate During the Year		1.69	%		1.75	%
Maximum month-end Balance		10,044			10,441

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Federal Home Loan Bank Long Term Borrowings.  The Bank had fixed rate putable advances maturing on January 14, 2015 in the amount of $13,000, putable on January 14, 2010 and quarterly thereafter, with a weighted average rate of 2.99%.  Pursuant to collateral agreements with the FHLB, non-repurchase advances and other overnight facilities, which the Bank utilizes, are secured by qualifying first mortgage loans, commercial real estate, FHLB stock and interest-bearing demand deposits with the FHLB.

Structured Repurchase Agreements.  In a leverage strategy, on April 30, 2008, the Bank entered into two balance sheet leverage transactions whereby it borrowed a total of $35,000 in multiple rate repurchase agreements with an initial average cost of 3.67% and invested the proceeds in U. S. Agency pass-through mortgage backed securities (the “Securities”), which were pledged as collateral.  The Bank secured the borrowed funds by Securities valued at 116% of the outstanding principal balance of the borrowings.  The borrowings have original maturity dates ranging from four to ten years, with a weighted average maturity of 5.9 years and certain borrowings have a call option starting with periods ranging from one to two years after origination and are continuously callable after the initial call date.  During the loan term, any collateral that is subject to maturity or call is replaced with other U. S. Agency instruments approved by the lender.

A summary of the material terms of each agreement is set forth below.

Four Year Liability Side Structured Repurchase Agreement. The Bank agreed to transfer approximately $10,900 of U. S. Agency pass-through Mortgage Backed Securities as collateral for a $10,000 repurchase facility, bearing interest at market rates.  The termination for the repurchase facility is April 30, 2012.

Ten Year Non-Putable Three Year Liability Side Structured Repurchase Agreement.  The Bank agreed to transfer approximately $11,800 of U. S. Agency pass-through Mortgage Backed Securities as collateral for a $10,000 repurchase facility, bearing interest at market rates.  The termination for the repurchase facility is April 30, 2018, subject to early cancellation.

Ten Year Non-Putable Two Year Liability Side Structured Repurchase Agreement.  The Bank agreed to transfer approximately $5,900 of U. S. Agency pass-through Mortgage Backed Securities as collateral for a $5,000 repurchase facility, bearing interest at market rates.  The termination for the repurchase facility is April 30, 2018, subject to early cancellation.

Five Year Non-Putable Three Year Bermudan Structured Repurchase Agreement.  The Bank agreed to transfer approximately $11,800 of U. S. Agency pass-through Mortgage Backed Securities as collateral for a $10,000 repurchase facility, bearing interest at market rates.  The termination for the repurchase facility is April 30, 2013, subject to early cancellation.

Term Repurchase Agreements:
Repurchase agreement - rate 3.28%, due April 30, 2018, callable after April 30, 2011	$       10,000
Repurchase agreement - rate 2.96%, due April 30, 2018, callable after April 30, 2010	5,000
Structured repurchase agreement - rate 3.71%, due April 30, 2013, callable after   April 30, 2011, with embedded interest cap at LIBOR of 3.50% starting April 30, 2010	10,000
Structured repurchase agreement - rate 4.39%, due April 30, 2012 with embedded   interest cap at LIBOR of 3.50% starting April 30, 2010	10,000
	$       35,000

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Results of Operations for the Years Ended December 31, 2011 and 2010

Overview.

Net income totaled $1.9 million for the year ended December 31, 2011 compared to net income of $1.7 million for the year ended December 31, 2010.

Net Interest Income.

Net interest income was $13.8 million for the year ended December 31, 2011 compared to $12.6 million for the year ended December 31, 2010.  Total interest income of $17.7 million was recorded for the year ended December 31, 2011, as interest income on loans increased and interest income on securities and other interest income decreased.    Interest income on loans increased by 6.3% to $14.5 million due to higher average balances while the average yield remained steady at 5.95%.  Interest income on investment securities decreased by 20.6% to $2.9 million, primarily due to a decrease of $11.0 million, or 13.6%, in average investment balances and a decline of 37 basis points in investment yields.  Investment yields were negatively impacted primarily by accelerated prepayments on the Bank’s mortgage-backed securities which increased the amortization of premiums paid and decreased the yield on those investments during the year ended December 31, 2011.

Total interest expense was $3.9 million for the year ended December 31, 2011 compared to $5.0 million for the year ended December 31, 2010.  Average Federal Home Loan Bank advances and other borrowings decreased by $100,000 and interest expense related to these borrowings decreased $38,000, while the rate paid decreased 19 basis points, for the year ended December 31, 2011.  The cost of interest-bearing deposits decreased $1.1 million, or 52 basis points, as average balances of interest-bearing deposits remained steady at December 31, 2011 as compared to December 31, 2010.  Average long-term borrowings at other banks (which consist of borrowings related to the leverage transaction entered into in April of 2008) remained unchanged at $35.0 million and interest expense remained constant at $1.3 million for the year ended December 31, 2011 compared to the year ended December 31, 2010.

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Average Balances and Yields.

The following table sets forth certain information relating to the Company’s average balance sheet and reflects the average yield on assets and cost of liabilities for the periods indicated and the average yields earned and rates paid. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the years ended December 31, 2011, 2010 and 2009.  No tax equivalent adjustments have been made as the Company’s investment in tax exempt assets, during the periods presented, was considered immaterial. The table also presents information for the periods indicated with respect to the differences between the average yield earned on interest-earning assets and average rate paid on interest-bearing liabilities, or “interest rate spread,” which banks have traditionally used as an indicator of profitability. Another indicator of net interest income is “net interest margin,” which is its net interest income divided by the average balance of interest-earning assets. Non-accrual loans are included in average balances. Loan fees and late charges are included in interest income on loans and are not material.

	Year Ended December 31,
	2011							2010							2009
			Interest							Interest							Interest
	Average		Income/		Yield/			Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost			Balance		Expense		Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Interest-earning demand deposits	$	12,542	$	43		0.34	%	$	11,796	$	44		0.37	%	$	6,910	$	141		2.05	%
Loans		243,722		14,505		5.95	%		229,437		13,641		5.95	%		192,143		11,371		5.92	%
Investment securities		70,165		2,905		4.14	%		81,163		3,659		4.51	%		118,245		5,585		4.72	%
Other interest-earning assets		4,855		202		4.16	%		5,148		227		4.41	%		5,509		135		2.44	%
Total interest-earning assets		331,284		17,655		5.33	%		327,544		17,571		5.36	%		322,807		17,232		5.34	%
Non-interest-earning assets		15,820							18,027							21,311
Total assets	$	347,104						$	345,571						$	344,118
Liabilities and shareholders' equity:
Interest-bearing deposits	$	199,566	$	2,137		1.07	%	$	200,842	$	3,192		1.59	%	$	188,227	$	4,518		2.40	%
FHLB advances and other borrowings		19,223		462		2.40	%		19,323		500		2.59	%		33,329		545		1.64	%
Long-term borrowings at other banks		35,000		1,304		3.73	%		35,000		1,307		3.73	%		35,000		1,304		3.73	%
Total interest-bearing liabilities		253,789		3,903		1.54	%		255,165		4,999		1.96	%		256,556		6,367		2.48	%
Non-interest-bearing deposits		23,104							18,176							14,906
Other noninterest-bearing liabilities		2,829							3,743							2,529
Total liabilities		279,722							277,084							273,991
Shareholders' equity		67,382							68,487							70,127
Total liabilities and shareholders' equity	$	347,104						$	345,571						$	344,118
Net interest income			$	13,752						$	12,572						$	10,865
Net interest margin						4.15	%						3.84	%						3.37	%
Interest rate spread						3.79	%						3.40	%						2.86	%
Average interest-earning assets to
average interest-bearing liabilities						130.54	%						128.37	%						125.82	%

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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 rate (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 proportionally between rate and volume.

	Year Ended December 31, 2011 compared to Year Ended December 31, 2010							Year Ended December 31, 2010 compared to Year Ended December 31, 2009
	Increase (Decrease) due to							Increase (Decrease) due to
	Volume		Rate		Net			Volume		Rate		Net
	(Dollars in thousands)
Interest and dividend income:
Interest-earning demand deposits	$	3	$	(4)	$	(1	)	$	632	$	(729)	$	(97)
Loans		841		23	$	864			2,212		58		2,270
Investment securities		(469)		(285)	$	(754	)		(1,677)		(249)		(1,926)
Other interest-earning assets		(12)		(13)	$	(25	)		(9)		101		92
Total earning assets	$	363	$	(279)	$	84		$	1,158	$	(819)	$	339
Interest expense:
Interest bearing deposits	$	(18)	$	(1,037)	$	(1,055	)	$	326	$	(1,652)	$	(1,326)
FHLB advances and other borrowings		(3)		(35)		(38	)		117		(162)		(45)
Long-term borrowings at other banks		1		(4)		(3	)		(1)		4		3
Total interest-bearing liabilities		(20)		(1,076)		(1,096)			442		(1,810)		(1,368)
Net increase (decrease) in interest income	$	383	$	798	$	1,180		$	716	$	991	$	1,707

Provision for Loan Losses.

The provision for loan losses was $967,000 for the year ended December 31, 2011 compared to $1.3 million for the year ended December 31, 2010.  The decrease in the provision in 2011 was primarily due to slower loan growth and decreases in nonperforming loans at December 31, 2011.  The Bank continues to closely monitor asset quality and believes that the allowance for loan losses at December 31, 2011 adequately reserved for any potential losses inherent in the loan portfolio at year-end.

Non-performing assets totaled $4.2 million, or 1.14% of total assets, at December 31, 2011 compared to $3.1 million, or 0.90% of total assets, at December 31, 2010.  At December 31, 2011, other real estate owned totaled $1.4 million compared to $115,000 at December 31, 2010.  At December 31, 2011, other real estate owned consisted primarily of two commercial real estate loans, three non-residential land loans, one consumer loans and a residential construction loan.  The Bank foreclosed on the residential construction loan in September 2011.  Because construction was approximately 80% complete at the time of foreclosure, the Bank has contracted with a local builder to complete the construction.  The Bank expects to incur approximately $88,000 of additional costs ($65,000 was recorded as of December 31, 2011) in order to complete construction which will result in a corresponding increase to other real estate owned.   There was a 35.7% increase in the level of classified assets from $8.5 million at December 31, 2010 to $11.5 million at December 31, 2011 primarily due to increased classified assets in the one-to-four family residential, multi-family and commercial loan portfolios.  The Bank continues to focus on working closely with customers in order to mitigate any loss exposure associated with the increase in the level of classified assets.  Classified assets are primarily loans rated special mention, substandard, or doubtful in accordance with regulatory guidance.  These assets warrant and receive increased management oversight and loan loss reserves have been established to account for the increased credit risk of these assets. 

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An analysis of the changes in the allowance for loan losses is presented under “—Risk Management—Analysis and Determination of the Allowance for Loan Losses.”

Non-interest Income.  The following table shows the components of non-interest income for the years ended December 31, 2011 and 2010.

	Year Ended December 31,
	2011		2010		% Change
	(Dollars in thousands)
Non-interest Income
Service charges on deposit accounts and other fees	$	1,267	$	1,212		4.54	%
Net gains on sales of mortgage loans held for sale		973		1,205		(19.25)
Net realized gain on sales of available-for-sale securities		25		104		(75.96)
Insurance and brokerage commissions		121		132		(8.33)
Other		136		85		60.00
Total non-interest income	$	2,522	$	2,738		(7.89)	%

Total non-interest income was $2.5 million for the year ended December 31, 2011, compared to total non-interest income of $2.7 million for the year ended December 31, 2010.

Comparative results for the twelve months ended December 31, 2011 versus the twelve months ended December 31, 2010 were primarily impacted by a decrease of $232,000, or 19.3%, in net gains on mortgage loans held for sale due to lower origination volume.  Additionally, the Company recorded $25,000 of net gains on sales of available-for-sale securities during the year ended December 31, 2011 compared to $104,000 for the year ended December 31, 2010.  Insurance and brokerage commissions declined 8.3% for the year ended December 31, 2011 as a result of continued overall market uncertainty. These decreases were somewhat offset by increases in other income and in service charges on deposit accounts and other fees.

Non-interest Expense. The following table shows the components of non-interest expense and the percentage changes for the years ended December 31, 2011 and 2010.

	Year Ended December 31,
	2011		2010		% Change
	(Dollars in thousands)
Non-interest Expense
Salaries and employee benefits	$	6,292	$	6,146		2.38	%
Net occupancy expense		703		693		1.44
Equipment expense		722		726		(0.55)
Data processing fees		960		885		8.47
Professional fees		831		434		91.47
Marketing expense		563		245		129.80
Supplies and communication		341		282		20.92
Loan collection and repossession expense		38		173		(78.03)
Other		1,836		1,728		6.25
Total non-interest expense	$	12,286	$	11,312		8.61	%

For the year ended December 31, 2011 non-interest expense increased $974,000, or 8.6% to $12.3 million compared to $11.3 million for the year ended December 31, 2010.  The increase in non-interest expense in 2011 was primarily due to increases in marketing expense and professional fees associated with the Bank’s charter conversion and name change, which are non-recurring in nature.

Professional fees increased $397,000 or 91.5% to $831,000 for the year ended December 31, 2011 compared to $434,000 at December 31, 2010.  Marketing expense increased $318,000, or 129.8%, to $563,000 at December 31, 2011 compared to $245,000 at December 31, 2010.  Loan collection and repossessed asset expense decreased to $38,000 for the year ended December 31, 2011 from $173,000 for the year ended December 31, 2010.  Total salaries and employee benefits increased $146,000, or 2.4% for the year ended December 31, 2011 compared to the year ended December 31, 2010, mainly due to merit and bonus increases.

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Provision for Income Taxes.

The provision for income taxes was $1.1 million for the year ended December 31, 2011 compared to a provision for income taxes of $968,000 for the year ended December 31, 2010.  The effective income tax rate differs from the federal statutory rate due primarily to state income taxes and exempt interest income.

Risk Management

Overview.  Managing risk is an essential part of successfully managing a financial institution. Our most prominent risk exposures are credit risk, interest rate risk and market risk. Credit risk is the risk of not collecting the interest and/or the principal balance of a loan or investment when it is due. Interest rate risk is the potential reduction of interest income as a result of changes in interest rates. Market risk arises from fluctuations in interest rates that may result in changes in the values of financial instruments, such as available-for-sale securities, that are accounted for on a mark-to-market basis.  Other risks that we face are operational risks, liquidity risks and reputation risk. Operational risks include risks related to fraud, regulatory compliance, processing errors, technology and disaster recovery.  Liquidity risk is the possible inability to fund obligations to depositors, lenders or borrowers.  Reputation risk is the risk that negative publicity or press, whether true or not, could cause a decline in our customer base or revenue.

Credit Risk Management.  Our strategy for credit risk management focuses on having well-defined credit policies and uniform underwriting criteria and providing prompt attention to potential problem loans.

When a borrower fails to make a required loan payment, we take a number of steps to have the borrower cure the delinquency and restore the loan to current status.  When the loan becomes 15 days past due, a late notice is sent to the borrower.  When the loan becomes 30 days past due, a more formal letter is sent. Between 15 and 30 days past due, telephone calls are also made to the borrower. After 30 days, we regard the borrower as in default.  At 60 days delinquent, the borrower may be sent a letter from our attorney and we may commence collection proceedings. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure sale, the real property securing the loan is sold at foreclosure.  When a consumer loan becomes 60 days past due, we institute collection proceedings and attempt to repossess any personal property that secures the loan.  Management informs the board of directors monthly of the amount of loans delinquent more than 30 days, all loans in foreclosure and repossessed property that we own.

Nonperforming and Classified Assets.

We consider repossessed assets and loans that are 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 any 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 less costs to sell 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.

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

	At December 31,
	2011			2010			2009			2008			2007
	(Dollars in thousands)
Nonaccrual loans:
One-to-four family	$	2,135		$	1,266		$	888		$	641		$	613
Multifamily and nonresidential		-			541			432			-			-
Construction		-			-			-			165			184
Land		-			541			-			-			-
Consumer		254			240			65			10			30
Commercial		399			397			18			14			9
Total		2,788			2,985			1,403			830			836
Accruing loans past due 90 days or more:
One-to-four family		-			-			-			-			-
Multi-family and nonresidential		-			-			-			-			-
Construction		-			-			-			-			-
Land		-			-			-			-			-
Consumer		-			-			-			-			-
Commercial		-			-			-			-			-
Total		-			-			-			-			-
Total of nonaccrual and 90 days or more past due loans		2,788			2,985			1,403			830			836
Real estate owned		1,391			115			301			-			-
Other nonperforming assets		-			16			-			-			-
Total nonperforming assets	$	4,179		$	3,116		$	1,704		$	830		$	836
Total nonperforming loans to total loans		1.06	%		1.23	%		0.66	%		0.46	%		0.71	%
Total nonperforming loans to total assets		0.76	%		0.86	%		0.41	%		0.25	%		0.33	%
Total nonperforming assets to total assets		1.14	%		0.90	%		0.50	%		0.25	%		0.33	%

Nonperforming assets include nonaccrual loans and foreclosed assets.  Non-performing assets totaled $4.2 million at December 31, 2011 compared to $3.1 million at December 31, 2010.  Other real estate owned consisted primarily of one commercial real estate loan, two non-residential land loans, two consumer loans and a residential construction loan.  The Bank foreclosed on the residential construction loan in September of 2011.  Because construction was approximately 80% complete at the time of foreclosure, the Bank has contracted with a local builder to complete the construction.  The Bank expects to incur approximately $88,000 of additional costs ($65,000 was recorded as of December 31, 2011) in order to complete construction which will result in a corresponding increase to other real estate owned.  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 $68,000 in 2011 and $57,000 in 2010.

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The following tables set forth information about modifications which were considered troubled debt restructurings (“TDRs”) as of December 31, 2011 and December 31, 2010.

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

Modifications
As of December 31, 2010
(Dollars in thousands)
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings
Commercial		1	$	178	$	178
Troubled Debt Restructurings That Subsequently Defaulted	Number of Contracts		Pre-Modification Outstanding Recorded Investment
Troubled debt restructurings
Commercial		-	$	-

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 Loans characterized as TDRs totaled $436,000 at December 31, 2011, compared to $178,000 at December 31, 2010. The allowance allocated to TDRs, excluding specifically-impaired loans referred to above, totaled $0 at both December 31, 2011 and 2010. The TDR total of $436,000 at December 31, 2011 is comprised of four loans.  One is comprised of a single commercial real estate loan, which was identified as a TDR at December 31, 2010 and 2011, for which the Company agreed to accept interest only payments for one year and will be removed from TDR status during the first quarter of 2012, upon return to amortization status.  The remaining TDRs consist of one single family residential loan in the amount of $165,000, which was restructured, has subsequently failed to perform under the restructured terms, and has been referred to counsel for foreclosure, and two TDRs that consist of one consumer and one commercial which total $99,000 and both are paying as agreed under the restructured terms.

Federal regulations require us to review and classify our assets on a regular basis. 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.

The following table shows the aggregate amounts of our classified assets at the dates indicated.

	At December 31,
	2011		2010
	(Dollars in thousands)
Special mention assets	$	3,178	$	3,783
Substandard assets		8,096		4,467
Doubtful assets		211		212
Total classified assets	$	11,485	$	8,462

Classified assets increased to $11.5 million at December 31, 2011 as compared to $8.5 million at December 31, 2010, primarily related to the one-to-four family residential and other real estate owned loan portfolios.  Classified assets include loans that are classified due to factors other than payment delinquencies, such as lack of current financial statements and other required documentation, insufficient cash flows or other deficiencies, and, therefore, are not included as non-performing assets. Other than as disclosed in the above tables, there are no other loans where management has serious doubts about the ability of the borrowers to comply with the present loan repayment terms.

 Analysis and Determination of the Allowance for Loan Losses.

The allowance for loan losses is a valuation allowance for probable credit losses in the loan portfolio and represents management’s best estimate of known and inherent losses in the loan portfolio, based upon management’s evaluation of the portfolio’s collectability. We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings. The recommendations for increases or decreases to the allowance are approved by the Asset Quality Review Committee and presented to the Board of Directors.

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

45

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

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

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

At December 31, 2011, our allowance for loan losses represented 1.64% of total gross loans and 154.8% of nonperforming loans.  At December 31, 2010, our allowance for loan losses represented 1.5% of total gross loans and 122.2% of nonperforming loans.  The allowance for loan losses increased $667,000 to $4.3 million at December 31, 2011 from $3.6 million at December 31, 2010 primarily due to increased classified loans, as compared to one year ago.

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

	At December 31,
	2011								2010								2009
						% of								% of								% of
			% of			Loans in					% of			Loans in					% of			Loans in
			Allowance			Category					Allowance			Category					Allowance			Category
			to Total			to Total					to Total			to Total					to Total			to Total
	Amount		Allowance			Loans			Amount		Allowance			Loans			Amount		Allowance			Loans
	(Dollars in thousands)
One-to-four family	$	476		11.0	%		17.0	%	$	545		14.9	%		18.1	%	$	280		10.0	%		20.8	%
Multi-family and nonresidential		1,063		24.6			43.6			1,061		29.1			37.5			1,125		40.0			36.3
Construction		400		9.3			10.5			325		8.9			11.0			160		5.7			12.5
Land		614		14.2			9.6			730		20.0			10.9			286		10.2			9.7
Consumer		296		6.9			8.5			250		6.9			9.1			200		7.1			9.3
Commercial		1,467		34.0			10.8			738		20.2			13.4			762		27.1			11.4
Total allowance for loan losses	$	4,316		100.0	%		100.0	%	$	3,649		100.0	%		100.0	%	$	2,813		100.0	%		100.0	%

	At December 31,
	2008								2007
						% of								% of
			% of			Loans in					% of			Loans in
			Allowance			Category					Allowance			Category
			to Total			to Total					to Total			to Total
	Amount		Allowance			Loans			Amount		Allowance			Loans
	(Dollars in thousands)
One-to-four family	$	220		10.1	%		21.4	%	$	185		12.3	%		26.9	%
Multi-family and nonresidential		871		40.1			36.5			870		57.6			27.4
Construction		185		8.5			13.6			42		2.8			17.6
Land		39		1.8			8.0			40		2.6			9.8
Consumer		135		6.2			9.3			75		5.0			8.6
Commercial		725		33.4			11.2			298		19.7			9.7
Total allowance for loan losses	$	2,175		100.0	%		100.0	%	$	1,510		100.0	%		100.0	%

46

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

Analysis of Loan Loss Experience.

The following table sets forth an analysis of the allowance for loan losses for the periods indicated.

	Year Ended December 31,
	2011			2010			2009			2008			2007
	(Dollars in thousands)
Allowance for loan losses at beginning of period	$	3,649		$	2,813		$	2,175		$	1,510		$	2,025
Provision (Credit) for loan losses		967			1,334			868			685			(364	)
Charge offs:
One-to-four family		18			311			44			22			50
Multi-family and nonresidential		9			-			-			-			108
Construction		32			-			-			-			-
Land		-			-			-			-			-
Consumer		45			124			68			67			85
Commercial		236			91			150			-			-
Total charge-offs		340			526			262			89			243
Recoveries:
One-to-four family		-			4			-			2			13
Multi-family and nonresidential		-			-			-			-			-
Construction		-			-			-			-			-
Land		-			-			-			-			10
Consumer		8			12			13			41			24
Commercial		32			12			19			26			45
Total recoveries		40			28			32			69			92
Net charge-offs		300			498			230			20			151
Allowance for loan losses at end of period	$	4,316		$	3,649		$	2,813		$	2,175		$	1,510
Allowance for loan losses to nonperforming loans		154.81	%		122.20	%		200.50	%		262.00	%		180.62	%
Allowance for loan losses to total loans outstanding   at the end of the period		1.64	%		1.51	%		1.31	%		1.22	%		1.28	%
Net charge-offs to average loans outstanding during the year		0.12	%		0.22	%		0.12	%		0.01	%		0.14	%

47

Capital and Liquidity.

Capital.  At December 31, 2011, shareholders’ equity totaled $66.5 million compared to $66.7 million at December 31, 2010. In addition to net income of $1.9 million, other significant changes in shareholders’ equity during 2011 included $923,000 of dividends paid, and $611,000 related to our ESOP share release. The change in the accumulated other comprehensive income component of shareholders’ equity totaled a net, after-tax, unrealized gain of $189,000 at December 31, 2011 compared to a net, after-tax, unrealized gain of $119,000 at December 31, 2010. Under regulatory requirements, amounts reported as accumulated other comprehensive income/loss related to securities available for sale, defined benefit post-retirement benefit plans and effective cash flow hedges do not increase or reduce regulatory capital and are not included in the calculation of risk-based capital and leverage ratios. The Company paid quarterly cash dividends of $0.05 per common share during each of the four quarters of 2011.  The dividend payout ratios, representing dividends per share divided by diluted earnings per share for the years ended December 31, 2011 and 2010 were 45.5% and 51.3%, respectively.  The dividend payout is continually reviewed by management and the Board of Directors.

The Company’s board of directors has authorized five stock repurchase programs.  The stock repurchase programs allow the Company to proactively manage its capital position and return excess capital to shareholders.  Under the first stock repurchase program, which was approved on December 17, 2008, the Company was authorized to repurchase up to 263,234 shares or 5.0%, of the Company’s issued common stock, through open market purchases or privately negotiated transactions, from time to time, depending on market conditions and other factors.  The first stock repurchase program was completed during the first quarter of 2010.  On March 4, 2010, a second repurchase program was approved which authorized the repurchase of up to 252,319 or 5.0% of the Company’s issued common stock, through open market purchases or privately negotiated transactions, from time to time, depending on market conditions and other factors.  The second stock repurchase program was completed during the third quarter of 2010.  On June 9, 2010, a third repurchase program was approved which authorized the repurchase of up to 240,524 or 5.0% of the Company’s issued common stock, through open market purchases or privately negotiated transactions, from time to time, depending on market conditions and other factors.  The third quarter stock repurchase program was completed during the fourth quarter of 2011. On November 17, 2010, a fourth repurchase program was approved which authorized the repurchase of up to 231,624 or 5.0% of the Company’s issued common stock, through open market purchases or privately negotiated transactions, from time to time, depending on market conditions and other factors.  On February 15, 2012, a fifth repurchase program was approved which authorized the repurchase of up to 220,706 or 5.0% of the Company’s issued common stock, through open market purchases or privately negotiated transactions, from time to time, depending on market conditions and other factors.  There is no guarantee as to the exact number of shares to be repurchased by the Company.  Also see Part II, Item 5 - Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, included elsewhere in this report.

Liquidity. Liquidity measures the ability to meet current and future cash flow needs as they become due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits and to take advantage of interest rate market opportunities. The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets, and its access to alternative sources of funds. The Company seeks to ensure its funding needs are met by maintaining a level of liquid funds through asset/liability management.

Asset liquidity is provided by liquid assets which are readily marketable or pledgeable or which will mature in the near future. Liquid assets include cash, interest-bearing deposits in banks, securities available for sale, maturities and cash flow from securities held to maturity, and federal funds sold and resell agreements.

The Bank relies on deposits as its principal source of funds and, therefore, must be in a position to service depositors' needs as they arise. Fluctuations in the balances of a few large depositors may cause temporary increases and decreases in liquidity from time to time. We deal with such fluctuations by using existing liquidity sources.

Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of investment securities and borrowings from the Federal Home Loan Bank of Cincinnati, Federal Reserve Bank, repurchase agreements and federal funds purchased. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

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

The Company is a separate legal entity from the Bank and must provide for its own liquidity.  In addition to its operating expenses, the Company, on a stand-alone basis, is responsible for paying any dividends declared to its shareholders.  The Company also has repurchased shares of its common stock.  The amount of dividends that the Bank may declare and pay to the Company is limited under applicable Tennessee law and the regulations of the TDFI.  On a stand-alone basis, the Company had liquid assets of approximately $9.9 million at December 31, 2011.

48

Off Balance Sheet Arrangements, Commitments and Contractual Obligations.

Off-Balance Sheet Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with 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 information about our loan commitments and unused lines of credit, see note 17 to the consolidated financial statements beginning on page F-1 of this annual report.

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

Commitments.  At December 31, 2011, we had $2.4 million in loan commitments outstanding, $31.0 million in unused commercial lines of credit (including unadvanced portions of construction loans) and $11.3 million in unused open-end consumer lines of credit. Certificates of deposit due within one year of December 31, 2011 totaled $47.9 million, or 68.3% of certificates of deposit. We believe the large percentage of certificates of deposit that mature within one year reflects customers’ hesitancy to invest their funds for long periods due to the recent low interest rate environment and local competitive pressure. If these maturing deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit and borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before December 31, 2011. We believe, however, based on past experience that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Contractual Obligations.  The following table presents certain of our contractual obligations as of December 31, 2011.

	0 – 1	1 – 3	3 – 5	Over 5
	Year	Years	Years	Years	Total
	(Dollars in thousands)
Deposits without stated maturity	$       162,422	$              -	$            -	$         -	$       162,422
Certificates of deposit	47,886	21,458	818	-	70,162
Operating leases	-	10	-	-	10
Purchase obligations	1,160	1,849	251	369	3,629
Long-term debt - Federal Home Loan Bank	-	-	13,000	-	13,000
Long-term debt - other banks	10,000	10,000	-	15,000	35,000
Total contractual obligations	$     221,468	$      33,317	$    14,069	$ 15,369	$     284,223

Regulatory Capital Management. We are subject to various regulatory capital requirements administered by our regulators, 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 December 31, 2011 and 2010, we exceeded all of our regulatory capital requirements. We are considered “well capitalized” under regulatory guidelines. See Item 1, “Business—Regulation and Supervision,” and note 12 to the consolidated financial statements beginning on page F-1 of this annual report.

Impact of Recent Accounting Pronouncements

For a discussion of the impact of recent accounting pronouncements, see note 1 to the consolidated financial statements beginning on page F-1 of this annual report.

Effect of Inflation and Changing Prices

The consolidated financial statements and related financial data presented in this annual report have been prepared according to accepted accounting principles in the United States, 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 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 to the same extent as the prices of goods and services.

49

Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk Management

The Bank manages the interest rate sensitivity of interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment.  Deposit accounts typically react more quickly to changes in market interest rates than loans because of the shorter maturities of deposits.  As a result, sharp increases in interest rates may adversely affect earnings while decreases in interest rates may beneficially affect earnings.  To reduce the potential volatility of earnings, the Bank has sought to improve the match between asset and liability maturities and rates, while maintaining an acceptable interest rate spread.  The Bank’s strategy for managing interest rate risk emphasizes:  adjusting the maturities of borrowings; adjusting loan terms and the mix of adjustable rate loans and fixed rate loans; adjusting the investment portfolio mix and duration and selling in the secondary market substantially all newly originated one-to-four family residential real estate loans.  We currently do not participate in hedging programs, interest rate swaps or other activities involving the use of derivative financial instruments.

The Bank has an Asset/Liability Committee which includes members of management approved by the Board of Directors, to communicate, coordinate and control all aspects involving asset/liability management.  The committee establishes and monitors the volume, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals.

The goal is to manage asset and liability positions to moderate the effects of interest rate fluctuations on net interest income and net income.

Net Portfolio Value Analysis

At December 31, 2011, the Bank used a net portfolio value analysis prepared by the Office of the Comptroller of the Currency, the Bank’s former regulator, to review the level of the Bank’s interest rate risk.  This analysis measures interest rate risk by capturing changes in the net portfolio value of the Bank’s cash flows from assets, liabilities and off-balance sheet items, based on a range of assumed changes in market interest rates.  Net portfolio value represents the market value of portfolio equity and is equal to the market value of assets minus the market value of liabilities, with adjustments made for off-balance sheet items.  These analyses assess risk of loss in market risk-sensitive instruments in the event of a sudden and sustained 50 to 300 basis point increase or 50 and 100 basis point decrease in market interest rates with no effect given to any steps that the Bank might take to counter the effect of that interest rate movement.

50

The following table, which is based on information that the Bank provided to the Office of the Comptroller of the Currency, presents the change in the Bank’s net portfolio value at December 31, 2011 that would occur in the event of an immediate change in interest rates based on the Office of the Comptroller of the Currency assumptions, with no effect given to any steps the Bank might take to counteract that change.

			Net Portfolio Value							Net Portfolio Value as a % of
			(Dollars in thousands							Portfolio Value of Assets
Basis Point (“bp”)
Change in Rates			$ Amount		$ Change		% Change			NPV Ratio			Change
	+300	bp	$	59,256	$	(2,581)		(4)	%		15.90	%		(35)	bp
	+200	bp		61,431		(407)		(1)			16.33			8	bp
	+100	bp		62,027		189		-			16.37			12	bp
	+50	bp		61,768		(69)		-			16.27			2	bp
	0	bp		61,837		-		-			16.25			-	bp
	-50	bp		60,645		(1,192)		(2)			15.95			(31)	bp
	-100	bp		59,793		(2,044)		(3)			15.73			(52)	bp

The Office of the Comptroller of the Currency used various assumptions in assessing interest rate risk.  These assumptions relate to interest rates, loan repayment rates, deposit decay rates and the market values of certain assets under differing interest rate scenarios, among others.  As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analyses presented in the foregoing tables.  For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates.  Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates.  Additionally, certain assets, such as adjustable-rate mortgage loans, have features that restrict changes in interest rates on a short-term basis over the life of the asset.  Further, if there is a change in interest rates, expected rates of prepayments on loans and early withdrawals from certificates could deviate significantly from those assumed in calculating the table.  Prepayment rates can have a significant impact on interest income.  Because of the large percentage of loans and mortgage-backed securities held by the Bank, rising or falling interest rates have a significant impact on the prepayment speeds of the Bank’s earning assets that in turn affect the rate sensitivity position.  When interest rates rise, prepayments tend to slow.  When interest rates fall, prepayments tend to rise.  The Bank’s asset sensitivity would be reduced if repayments slow and vice versa.  While we believe these assumptions to be reasonable, there can be no assurance that assumed prepayment rates will approximate actual future mortgage-backed security and loan repayment activity.

Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information required by this item is included herein beginning on page F-1.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None

51

Item 9A.   CONTROLS AND PROCEDURES

 (a)   Evaluation of disclosure controls and procedures.The Company's management, with the participation of the Chief Executive Officer and the Chief Financial Officer, conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of December 31, 2011. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of December 31, 2011.

(b)   Management's Report on Internal Control over Financial Reporting.The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). The Company's management, with the participation of the Chief Executive Officer and the Chief Financial Officer, conducted an evaluation of the effectiveness, as of December 31, 2011, of the Company's internal control over financial reporting based on the framework in "Internal Control—Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, the Company's management concluded that the Company's internal control over financial reporting was effective as of December 31, 2011.

(c)   Changes in Internal Control Over Financial Reporting.There were no changes in the Company's internal control over financial reporting that occurred during the fourth quarter of 2011 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 9B.   OTHER INFORMATION

None.

PART III

Item 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Board of Directors

For information relating to the directors of First Advantage Bancorp., the section captioned “Items to be Voted on by Stockholders—Item 1—Election of Directors” in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders is incorporated herein by reference.

Executive Officers

For information relating to officers of First Advantage Bancorp, see Part I, Item 1, “Business—Executive Officers of the Registrant” of this Annual Report on Form 10-K.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

For information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934, the cover page to this Annual Report on Form 10-K and the section captioned “Other Information Relating to Directors and Executive Officers—Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders are incorporated herein by reference.

Disclosure of Code of Ethics

For information concerning First Advantage Bancorp’s Code of Ethics, the information contained under the section captioned “Corporate Governance—Code of Ethics and Business Conduct” in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders is incorporated by reference. A copy of the Code of Ethics and Business Conduct is available to stockholders on the Company’s website at www.firstadvantagebanking.com.

52

Item 11.     EXECUTIVE COMPENSATION

For information regarding executive compensation, the sections captioned “Executive Compensation” and “Director Compensation” in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders are incorporated herein by reference.

Item 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

(a)Security Ownership of Certain Beneficial Owners

Information required by this Item is incorporated herein by reference to the section captioned “Stock Ownership” in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders.

(b)           Security Ownership of Management

Information required by this Item is incorporated herein by reference to the section captioned “Stock Ownership” in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders.

(c)           Changes in Control

Management of the Company knows of no arrangements, including any pledge by any person or securities of the Company, the operation of which may at a subsequent date result in a change in control of the registrant.

(d)           Equity Compensation Plan Information

Plan Category	Number of Shares to be Issued Upon Exercise of Outstanding Awards		Weighted- Average Exercise Price of Outstanding Awards		Number of Shares Available for Future Grants
Plans approved by stockholders:
2008 Executive Incentive Plan - options		364,639	$	10.29		102,419
2008 Executive Incentive Plan - restricted stock		58,124		-		54,099
Total plans approved by stockholders		422,763	$	10.29		156,518
Total plans not approved by stockholders		-	$	-		-
Total equity compensation plans		422,763	$	10.29		156,518
See further discussion in note 14 of the Consolidated Financial Statements.

Item 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR  INDEPENDENCE

Certain Relationships and Related Transactions

For information regarding certain relationships and related transactions, the section captioned “Other Information Relating to Directors and Executive Officers—Transactions with Related Persons” in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders is incorporated herein by reference.

Corporate Governance

For information regarding director independence, the section captioned “Corporate Governance—Director Independence” in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders is incorporated herein by reference.

Item 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

For information regarding the principal accountant fees and expenses, the section captioned “Items to Be Voted on By Stockholders—Item 2—Ratification of Independent Registered Public Accounting Firm” in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders is incorporated herein by reference.

53

Item 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(1) The financial statements required in response to this item are incorporated by reference from Item 8 of this Annual Report on Form 10-K.

(2) All financial statement schedules are omitted because they are not required or applicable, or the required information is shown in the consolidated financial statements or the notes thereto.

(3)   Exhibits

No.           Description

3.1	Charter of First Advantage Bancorp (1)
3.2	Bylaws of First Advantage Bancorp (1)
4.1	Form of Stock Certificate of First Advantage Bancorp (1)
10.1	Employment Agreement by and between First Advantage Bancorp and Earl O. Bradley, III, dated November 29, 2007* (2)
10.2	Employment Agreement by and between First Advantage Bank and Earl O. Bradley, III, dated November 29, 2007* (2)
10.3	Employment Agreement by and between First Advantage Bancorp and John T. Halliburton, dated November 29, 2007* (2)
10.4	Employment Agreement by and between First Advantage Bank and John T. Halliburton, dated November 29, 2007* (2)
10.8	Employment Agreement by and between First Advantage Bank and Jon R. Clouser, dated November 29, 2007* (2)
10.9	First Advantage Bancorp 2008 Equity Incentive Plan* (3)
11.1	Statement re:  computation of per share earnings (incorporated by reference to financial statements referenced in Item 8 of this Annual Report on Form 10-K).
21.1	Subsidiaries
23.1	Consent of HORNE LLP
31.1	Rule 13a-14(a)/15d-14(a) Certificate of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certificate of Chief Financial Officer
32.0	Section 1350 Certificate of Chief Executive Officer and Chief Financial Officer
101.0	The following materials from the Company's Annual Report on Form 10-K for the year ended December 31, 2011, formatted in XBRL (Extenible Business Reporting Language): (i) the Condensed Consolidated Balance Sheet, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Shareholders' Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to Condensed Consolidated Financial Statements**

_________________________________________________________________________

 * Management contract or compensatory plan, contract or arrangement

** Furnished, not filed.

(1) Incorporated herein by reference to the exhibits to the Company’s Registration Statement on Form S-1 (File No. 333-144454), as amended, initially filed with the Securities and Exchange Commission on July 10, 2007.

(2) Incorporated herein by reference to the exhibits to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 3, 2007.

(3) Incorporated herein by reference to the appendix to the Company’s Definitive Proxy Statement filed with the Securities and Exchange Commission on May 5, 2008.

54

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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
Date: March 8, 2012	By: /s/ Earl O. Bradley, III
	Earl O. Bradley, III
	Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/ Earl O. Bradley, III	Chief Executive Officer and Director	March 8, 2012
Earl O. Bradley, III	(principal executive officer)
/s/ Bonita H. Spiegl	Chief Financial Officer and Secretary	March 8, 2012
Bonita H. Spiegl	(principal accounting and financial officer)
/s/ William G. Beach	Director	March 8, 2012
William G. Beach
/s/ Vernon M. Carrigan	Director	March 8, 2012
Vernon M. Carrigan
/s/ Robert E. Durrett, III	Director	March 8, 2012
Robert E. Durrett, III
/s/ John T. Halliburton	President and Director	March 8, 2012
John T. Halliburton
/s/ William Lawson Mabry	Director	March 8, 2012
William Lawson Mabry
/s/ William H. Orgain	Director	March 8, 2012
William H. Orgain
/s/ Michael E. Wallace	Director	March 8, 2012
Michael E. Wallace
/s/ David L. Watson	Director	March 8, 2012
David L. Watson

55

EX-99

First Advantage Bancorp

Report of Independent Registered Public Accounting

Firm and Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

First Advantage Bancorp

Years Ended December 31, 2011 and 2010

Contents	Page
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Financial Statements
Consolidated Balance Sheets at December 31, 2011 and 2010	F-2
Consolidated Statements of Income for the years ended December 31, 2011 and 2010	F-3
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2011 and 2010	F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2011 and 2010	F-5
Notes to Consolidated Financial Statements	F-6

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

First Advantage Bancorp

Clarksville, Tennessee

We have audited the accompanying consolidated balance sheets of First Advantage Bancorp and subsidiaries (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of income, stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2011 and 2010, and the results of their operations, changes in stockholders’ equity, and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Jackson, Tennessee

March 8, 2012

First Advantage Bancorp
Consolidated Balance Sheets
(Dollars in thousands, except share and per share amounts)
	December 31,
	2011		2010
Assets
Cash and due from banks	$	7,651	$	4,151
Interest-bearing demand deposits with banks		1,680		1,387
Federal funds sold		1,425		2,250
Cash and cash equivalents		10,756		7,788
Available-for-sale securities, at fair value		70,279		74,214
Other investments		-		3,486
Loans held for sale		5,509		3,155
Loans, net of allowance for loan losses of $4,316 and $3,649    at December 31, 2011 and 2010, respectively		259,534		238,346
Premises and equipment, net		7,504		7,553
Other real estate owned and repossessed assets		1,923		663
Federal Home Loan Bank stock		2,988		2,988
Accrued interest receivable		1,571		1,420
Income taxes receivable		2,789		1,515
Deferred tax asset		1,927		2,199
Other assets		1,369		1,925
Total assets	$	366,149	$	345,252
Liabilities and Shareholders' Equity
Liabilities
Deposits
Demand	$	28,062	$	19,681
Savings, checking and money market		134,360		120,859
Time certificates		70,162		78,964
Total deposits		232,584		219,504
Short-term borrowings		14,676		6,215
Federal Home Loan Bank advances		13,000		13,000
Long-term debt		35,000		35,000
Other liabilities		4,414		4,806
Total liabilities		299,674		278,525
Commitments and contingencies		-		-
Shareholders' Equity
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no   shares issued or outstanding at December 31, 2011 or 2010		-		-
Common stock, $0.01 par value, 50,000,000 shares authorized,   4,459,135 shares issued and 4,038,260 outstanding at   December 31, 2011; 4,632,494 issued and 4,107,818 outstanding at   December 31, 2010		45		46
Additional paid-in-capital		44,579		46,626
Common stock held by:
Nonqualified Deferred Compensation Plan		(1,845)		(1,810)
Employee Stock Ownership Plan		(2,860)		(3,198)
2008 Equity Incentive Plan		(1,107)		(1,434)
Retained earnings		24,900		23,923
Accumulated other comprehensive income		2,763		2,574
Total shareholders' equity		66,475		66,727
Total liabilities and shareholders' equity	$	366,149	$	345,252

F-1

First Advantage Bancorp
Consolidated Statements of Income
(Dollars in thousands, except share and per share amounts)
	Years Ended December 31,
	2011		2010
Interest and dividend income
Loans	$	14,505	$	13,641
Investment securities		2,905		3,659
Other		245		271
Total interest and dividend income		17,655		17,571
Interest expense
Deposits		2,137		3,192
Borrowings		1,766		1,807
Total interest expense		3,903		4,999
Net interest income		13,752		12,572
Provision for loan losses		967		1,334
Net interest income after provision for loan losses		12,785		11,238
Non-interest income
Service charges on deposit accounts and other fees		1,267		1,212
Net gains on sales of mortgage loans held for sale		973		1,205
Net realized gain on sales of available-for-sale securities		25		104
Insurance and brokerage commissions		121		132
Other		136		85
Total non-interest income		2,522		2,738
Non-interest expense
Salaries and employee benefits		6,292		6,146
Net occupancy expense		703		693
Equipment expense		722		726
Data processing fees		960		885
Professional fees		831		434
Marketing expense		563		245
Supplies and communication		341		282
Loan collection and repossession expense		38		173
Other		1,836		1,728
Total non-interest expense		12,286		11,312
Income before income taxes		3,021		2,664
Provision for income taxes		1,121		968
Net income	$	1,900	$	1,696
Per common share:
Basic net income per common share	$	0.47	$	0.40
Diluted net income per common share	$	0.44	$	0.39
Dividends declared per common share	$	0.20	$	0.20
Basic weighted average common shares outstanding		4,075,562		4,259,064
Diluted weighted average common shares outstanding		4,352,781		4,295,093

F-2

First Advantage Bancorp
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 2011 and 2010
(Dollars in thousands, except share and per share amounts)
											Common
											Stock
											Acquired		Accumulated
							Additional				by		Other		Total
	Common  Stock				Comprehensive		Paid-in		Retained		Benefit		Comprehensive		Stockholders'
	Shares		Amount		Income		Capital		Earnings		Plans		Income		Equity
Balance at January 1, 2010		5,171,395	$	52			$	51,915	$	23,210	$	(7,106)	$	2,455	$	70,526
Comprehensive income, net of tax:
Net income		-		-	$	1,696		-		1,696		-		-		1,696
Change in unrealized appreciation of          available-for-sale securities, net of tax		-		-		119		-		-		-		119		119
Total comprehensive income		-		-	$	1,815		-		-		-		-		-
Dividends paid ($0.20 per common share)		-		-				-		(983)		-		-		(983)
Treasury stock purchase/retire		(538,901)		(6)				(5,776)								(5,782)
Purchase of shares by employee benefit plans		-		-				102		-		(102)		-		-
Release of shares by employee benefit plans		-		-				(692)		-		766		-		74
Stock-based compensation		-		-				1,077		-		-		-		1,077
Balance at December 31, 2010		4,632,494		46				46,626		23,923		(6,442)		2,574		66,727
Comprehensive income, net of tax:
Net income		-		-	$	1,900		-		1,900		-		-		1,900
Change in unrealized appreciation of          available-for-sale securities, net of tax		-		-		189		-		-		-		189		189
Total comprehensive income		-		-	$	2,089		-		-		-		-		-
Dividends paid ($0.20 per common share)		-		-				-		(923)		-		-		(923)
Treasury stock purchase/retire		(228,638)		(2)				(2,921)								(2,923)
Issuance of retired Treasury stock issued for stock option exercises		55,279		1				569								570
Purchase of shares by employee benefit plans		-		-				119		-		(119)		-		-
Release of shares by employee benefit plans		-		-				(656)		-		749		-		93
Stock-based compensation		-		-				842		-		-		-		842
Balance at December 31, 2011		4,459,135	$	45			$	44,579	$	24,900	$	(5,812)	$	2,763	$	66,475

F-3

First Advantage Bancorp
Consolidated Statements of Cash Flows
(Dollars in thousands)
	Years Ended December 31,
	2011	2010
Operating Activities
Net income	$                 1,900	$                 1,696
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	967	1,334
Depreciation, amortization and accretion	817	804
Deferred income taxes	64	303
Funding of mortgage loans held for sale	(39,673)	(52,485)
Proceeds from sales of mortgage loans held for sale	38,292	52,800
Net gains on sales of mortgage loans held for sale	(973)	(1,205)
Net realized gain on available for sale securities	(25)	(104)
Net (gain) loss on disposal of premises and equipment	41	2
Net (gain) loss on sale of foreclosed assets	(10)	38
Stock-based compensation	842	1,077
Decrease in other assets	242	229
(Decrease) increase in other liabilities	(1,667)	3,090
Net cash provided by operating activities	817	7,579
Investing Activities
Purchases of other investments	-	(3,486)
Proceeds from maturities of other investments	3,486	-
Purchases of securities available for sale	(21,473)	(16,696)
Proceeds from call/maturities and repayments of securities available-for-sale	23,873	36,457
Proceeds from sales of securities available for sale	1,864	4,856
Net increase in loans	(23,434)	(29,285)
Purchase of premises and equipment	(570)	(251)
Proceeds from sale of other real estate owned	140	918
Net cash used in investing activities	(16,114)	(7,487)
Financing Activities
Net increase in demand deposits, money market, checking and  savings accounts	21,882	11,408
Net decrease in time deposits	(8,802)	(8,144)
Decrease in repurchase agreements and other short-term borrowings	(2,039)	(668)
Proceeds from short-term borrowings	10,500	-
Cash paid for dividends	(923)	(983)
Stock repurchased/retired - repurchase program	(2,923)	(5,782)
Cash received upon exercise of employee stock options	570	-
Net cash provided (used in) by financing activities	18,265	(4,169)
Increase in Cash and Cash Equivalents	2,968	(4,077)
Cash and Cash Equivalents, Beginning of Period	7,788	11,865
Cash and Cash Equivalents, End of Period	$              10,756	$                 7,788
Supplemental Cash Flow Information
Interest paid	$                 3,963	$                 5,141
Income taxes paid (net of refunds)	$                 2,204	$                    144
Other real estate owned acquired through foreclosure of real estate loans	$                 1,391	$                    115

F-4

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Note 1:   Nature of Operations and Summary of Significant Accounting Policies

Conversion to Tennessee-chartered Commercial Bank and Name Change

On November 2, 2011, the Board of Directors of First Federal Savings Bank approved a change of the Bank’s name to First Advantage Bank in anticipation of the Bank’s conversion from a federally-chartered savings bank to a Tennessee-chartered commercial bank (the “Charter Conversion”).  At close of business on February 2, 2012, the Bank completed the Charter Conversion.  On that same date, the Company became a holding company regulated by the Board of Governors of the Federal Reserve System.  As a result of the charter conversion, the Bank is now regulated by the Tennessee Department of Financial Institutions (the “TDFI”) and the Federal Deposit Insurance Corporation (the “FDIC”).  The Bank’s deposits continue to be insured by the FDIC.  The charter conversion is not expected to have any significant financial impact or affect the Company’s and the Bank’s current activities.

Nature of Operations

First Advantage Bancorp is a holding company whose principal activity is the ownership and management of its wholly owned subsidiary, First Advantage Bank. The Bank has one inactive wholly owned subsidiary, First Financial Mortgage Corp.  The Bank is primarily engaged in providing a full range of banking and financial services to individual and corporate customers in Clarksville, Tennessee and surrounding areas.  The Bank is subject to the regulation of certain federal agencies and undergoes periodic examinations by those regulatory authorities.

Basis of Presentation

The accounting and financial reporting policies the Company follows conform, in all material respects, to accounting principles generally accepted in the United States of America. Certain items in prior period financial statements have been reclassified to conform to the current presentation.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and the Bank and its wholly owned subsidiary First Financial Mortgage Corporation (collectively referred to as the “Company”).  All significant inter-company accounts and transactions have been eliminated in consolidation.  First Financial Mortgage Corporation is an inactive subsidiary and, therefore, its operations are not material to the consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

F-5

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less, when purchased, to be cash equivalents.

     Other Investments

Other investments consist of non-negotiable time deposits placed with other financial institutions and have maturities ranging from six to twelve months, when purchased.  These investments were directly placed by the Company and are not considered brokered deposits and are fully insured by the Federal Deposit Insurance Corporation.

Securities

Available-for-sale securities, which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value.  Unrealized gains and losses are recorded, net of related income tax effects, in other comprehensive income. The Company does not hold any held-to-maturity securities, which would include any security for which the Company has the positive intent and ability to hold until maturity.  The Company does not hold any trading securities, which would include any security held for resale in anticipation of short-term market movements. Management determines the appropriate classification of securities at the time of purchase.

Interest income includes amortization of purchase premiums and discounts.  Realized gains and losses are derived from the amortized cost of the security sold.  Declines in fair value of available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses.  In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Loans Held for Sale

Mortgage loans held for sale originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate.  Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.  Gains and losses are realized at the time consideration is received and all other criteria for sales treatment have been met.

Loans

Loans that management has the intent and ability to hold for the foreseeable future, or until maturityorpayoffs, are reported at their outstanding unpaid principal balances and adjusted for any charge-offs, the allowance for loan losses, any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.  Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term.

Generally, the accrual of interest on loans is discontinued when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions.  When interest accrual is discontinued, all unpaid accrued interest is reversed.  Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due.  Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Prior to 2004, the Bank sold mortgage loans to the Government National Mortgage Association (GNMA) in the normal course of business and retained the servicing rights. The GNMA programs under which the loans were sold allowed us to repurchase individual delinquent loans that meet certain criteria from the securitized loan pool. At the Bank’s option, and without GNMA's prior authorization, the Bank may repurchase a delinquent loan for an amount equal to 100% of the remaining principal balance on the loan. Once the Bank has the unconditional ability to repurchase a delinquent loan, the Bank is deemed to have regained effective control over the loan and the Bank is required to recognize the loan on the balance sheet and record an offsetting liability, regardless of the intent to repurchase the loan. At December 31, 2011 residential real estate portfolio loans included $109 of loans available for repurchase under the GNMA optional repurchase programs with the offsetting liability recorded within other short-term borrowings.

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets.  The unpaid principal balances of mortgage loans serviced for others, with mortgage servicing rights fully amortized, were $14,772 and $20,879 at December 31, 2011 and December 31, 2010, respectively.

F-6

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have been incurred through a provision for loan losses charged to income.  Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and represents management’s best estimate of probable losses inherent in the loan portfolio.  An allowance is established for loans that are not currently considered impaired in order to recognize the inherent losses associated with lending activities. This historical valuation allowance is determined through two steps. First, an estimate of potential losses on the portfolio is created by analyzing historical losses for each loan category. Historical losses are calculated using both internal and peer group loss information. Internal loss history is calculated using the average of five years of actual losses. This is combined with the peer group loss data to create a range from which the Company selects a reserve amount for each portfolio based upon management’s professional judgment and experience within the particular segment. Second, additional significant factors that, in management’s judgment, affect the collectibility of the portfolio as of the evaluation date are considered. These significant factors may include changes in lending policies and procedures; international, national, regional and local economic conditions; changes in the nature and volume of the portfolio; changes in the experience, ability and depth of lending management; changes in the volume of past dues, non-accruals and classified assets; changes in the quality of the loan review system; changes in the value of underlying collateral for collateral dependent loans; concentrations of credit, and other factors. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement.  Accrual of interest and subsequent cash receipts on impaired loans are generally recorded in the same manner as nonaccrual loans. No interest income was recognized on non-accrual or impaired loans on a cash basis during 2011 or 2010. Loans are charged-off when the loss is confirmed.  Factors considered by management in determining impairment include payment status, collateral value, overall industry trends, customer management experience, balance sheet ratios, guarantor credit scores and the probability of collecting scheduled principal and interest payments when due. Loans are considered for impairment when they reach “substandard” or “doubtful” classification (see further discussion of these classifications in Note 5) or when management becomes aware of conditions existing at the balance sheet date that would make it probable that a loss has been incurred. Loans that experience insignificant payment delays and payment shortfalls are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

The Company only evaluates non-homogenous loans for potential impairment. The non-homogenous loan types are the construction and commercial portfolio segments. Large groups of smaller balance homogenous loans are not evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment measurements.

Specific risk characteristics relevant to each portfolio segment are as follows:

One-to-four family loans - A portion of the one-to-four family loans have adjustable-rates. While we anticipate that adjustable-rate loans will better offset the adverse effects of an increase in interest rates as compared to fixed-rate mortgages, an increased monthly mortgage payment required of adjustable-rate loan borrowers in a rising interest rate environment could cause an increase in delinquencies and defaults. The marketability of the underlying property also may be adversely affected in a high interest rate environment. In addition, although adjustable-rate mortgage loans make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits.

Multi-family and nonresidential real estate loans - Loans secured by multi-family and nonresidential real estate generally have larger balances and involve a greater degree of risk than one-to-four family residential mortgage loans. Of primary concern in multi-family and nonresidential real estate lending is the borrower’s creditworthiness and the feasibility and cash flow potential of the project. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject, to a greater extent than residential real estate loans, to adverse conditions in the real estate market or the economy. To monitor cash flows on income properties, we require borrowers and loan guarantors, if any, to provide annual financial statements on multi-family and nonresidential real estate loans. In reaching a decision on whether to make a multi-family or nonresidential real estate loan, we consider and review a global cash flow analysis of the borrower and consider the net operating income of the property, the borrower’s expertise, credit history and profitability, and the value of the underlying property. An environmental survey or environmental risk insurance is obtained when the possibility exists that hazardous materials may have existed on the site, or the site may have been impacted by adjoining properties that handled hazardous materials.

F-7

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Construction and Land loans - Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction and the estimated cost of construction. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, we may be required to advance funds beyond the amount originally committed to permit completion of the building. If the estimate of value proves to be inaccurate, we may be confronted, at or before the maturity of the loan, with a building having a value which is insufficient to assure full repayment if liquidation is required. If we are forced to foreclose on a building before or at completion due to a default, there can be no assurance that we will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs. In addition, speculative construction loans, which are loans made to home builders who, at the time of loan origination, have not yet secured an end buyer for the home under construction, typically carry higher risks than those associated with traditional construction loans. These increased risks arise because of the risk that there will be inadequate demand to ensure the sale of the property within an acceptable time. As a result, in addition to the risks associated with traditional construction loans, speculative construction loans carry the added risk that the builder will have to pay the property taxes and other carrying costs of the property until an end buyer is found. Land loans have substantially similar risks to speculative construction loans.

Consumer loans - Consumer loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are secured by assets that depreciate rapidly, such as motor vehicles. In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower. Consumer loan collections depend on the borrower’s continuing financial stability and, therefore, are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

Commercial loans - Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment income or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial business loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business loans may depend substantially on the success of the business itself. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

Monitoring

The Company monitors the credit quality of its loan portfolio on an ongoing basis. The responsibility to monitor credit quality of the loan portfolio begins with the Company’s board of directors. This is accomplished by the following as it relates specifically to the loan portfolio’s credit quality: review and approve a quarterly schedule of reports on portfolio composition and credit quality provided by management, review charge-offs as proposed by management, review and approve reports from the loan review function, and review and approve the adequacy of the Company’s allowance for loan losses and related provision.

The board of directors also created an Asset Quality Review Committee (“AQRC”) comprised of appropriate and qualified management personnel from executive management including the Chief Executive Officer, President, Chief Lending Officer, Chief Credit Officer, Chief Financial Officer and the Credit Administration Manager. This management committee was created with the purpose of managing the quality of the loan portfolio of the Company and keeps the board of directors informed of any changes in risk levels. The AQRC monitors standard indicators of risk such as past dues, credit extensions, policy exceptions, concentrations of industry and loan types, concentrations to individual borrowers and other relevant statistical measures of asset quality. The AQRC is also responsible for recommending and approving loan risk rating changes. The AQRC approves all charge-offs as recommended by the Chief Credit Officer and reports these to the board of directors. Each quarter the committee reviews, with the assistance of loan officers, in order to understand and approve the proposed action plans and the projection of the future balance of assets adversely classified. The results and action plans along with the projected balances are reported to the board of directors

The board of directors also has established, for purposes of monitoring credit quality of the loan portfolio, a credit administration function which is headed by the Chief Credit Officer (“CCO”). The CCO is the custodian of the Company’s credit quality and is the chairperson of the AQRC. The CCO is responsible for portfolio monitoring and reporting which includes: policy compliance, approval and tracking of policy exceptions, portfolio composition, concentrations, asset quality ratings, criticized loans, delinquencies, nonaccruals and charge-offs.  The CCO also determines the adequacy of the allowance for loan losses and leads problem loan resolution.

The final item that the board of directors initiated in regards to monitoring credit quality of the loan portfolio is to hire an independent loan review function (“Loan Review”). The purpose of Loan Review is to conduct periodic loan reviews and an annual review of loan policies and procedures, and report any findings to the audit committee of the board of directors.  Annually, Loan Review prepares and presents to the AQRC the Loan Review Plan to define the scope of the review to independently assure the following: timely and accurate assignment of asset quality ratings, compliance with the Company’s loan policies and procedures, accuracy of portfolio information and credit statistics provided to the Board, adequacy of the allowance for loan losses, documentation and enforceability of borrower obligations and the Company’s interest in underlying collateral.

F-8

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Derivatives

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 lock commitments, which are recorded at 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.  See Note 17 for additional information related to interest rate lock and forward sale commitments.

Premises and Equipment

Land is carried at cost.  Building and improvements, and furniture and equipment are carried at cost, less accumulated depreciation. Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets.

Federal Home Loan Bank Stock

Federal Home Loan Bank (“FHLB”) stock is a required investment for institutions that are members of the FHLB system.  The required investment in the common stock is based on a predetermined formula.  The Bank reports its investment in the FHLB stock at cost.

Other Real Estate Owned and Repossessed Assets

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

Securities Sold Under Agreements to Repurchase

The Company sells certain securities under agreements to repurchase.  The agreements are treated as collateralized financing transactions and the obligations to repurchase securities sold are reflected as a liability in the accompanying consolidated balance sheets.  The dollar amount of the securities underlying the agreements remains in the asset accounts.

Advertising and Marketing Expenses

Advertising and marketing costs are expensed as incurred.

Income Taxes

Income tax expense is the total of the current year’s income tax due or refundable and the change in deferred tax assets and liabilities (excluding components of other comprehensive income).  Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates.  A valuation allowance, if needed, reduces deferred tax assets to the expected amount most likely to be realized.  Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income and recoverable taxes paid in prior years.  Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized.  The Company and its subsidiaries filed consolidated income tax returns for 2011.

Rabbi Trust

The Company established a rabbi trust to fund its Nonqualified Deferred Compensation Plan. The Company accounts for these plans in accordance with FASB’s ASC 718 “Share-Based Payment.” Until the plan benefits are paid, creditors may make claims against the assets if the Company becomes insolvent.  See Note 14 for additional information.

F-9

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Stock-Based Compensation

The Company accounts for its stock-based compensation plans in accordance with FASB’s ASC 718 “Share-Based Payment.”  Compensation expense for stock options, non-vested stock awards and restricted stock is based on the fair value of the award on the measurement date, which, for the Company, is the date of the grant and is recognized ratably over the service period of the award.  The fair value of stock options granted is estimated using the Black-Scholes option-pricing model.  The fair value of non-vested stock awards and restricted stock is generally the market price of the Company’s stock.  Forfeited and expired options and forfeited shares of restricted stock become available for future grants.  See Note 14 for additional information.

Comprehensive Income

Comprehensive income includes all changes in shareholders’ equity during a period, except those resulting from transactions with shareholders.  Besides net income, other components of the Company’s comprehensive income include after tax effect of changes in the net unrealized gain/loss on securities available for sale.

Bank Owned Life Insurance

The Company has purchased single-premium life insurance policies on certain former directors of the Company.  The net cash surrender value of those polices is classified in other assets.  Changes in the value of the insurance policies are classified in non-interest income.

Transfers of Financial Assets

Transfers of financial assets (which includes loan participations) are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Fair Value Measurements

FASB’s ASC Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  In general, fair values of financial instruments are based upon quoted market prices, where available.  If such quoted market prices are not available, fair value is primarily determined by matrix pricing, and in some cases, fair value is determined by an independent third party.  Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.  These adjustments may include amounts to reflect counterparty credit quality as well as unobservable parameters.  Any such valuation adjustments are applied consistently over time.

Earnings Per Common Share

Basic earnings per share (“EPS”) is calculated by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted EPS is computed in a manner similar to that of basic EPS except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares (computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents (such as stock options and unvested restricted stock) were vested during the period. The weighted average  common shares outstanding equals the gross number of common shares issued less unallocated shares held by the  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.

F-10

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Recently Issued Accounting Standards

ASU No. 2011-03, “Transfers and Servicing (Topic 860) - Reconsideration of Effective Control for Repurchase Agreements.” ASU 2011-03 is intended to improve financial reporting of repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. ASU 2011-03 removes from the assessment of effective control (i) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (ii) the collateral maintenance guidance related to that criterion. ASU 2011-03 will be effective for the Corporation on January 1, 2012 and is not expected to have a significant impact on the Company’s consolidated financial position, results of operation, cash flows, or disclosures.

ASU 2011-04, “Fair Value Measurement (Topic 820) - Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs.” ASU 2011-04 amends Topic 820, “Fair Value Measurements and Disclosures,” to converge the fair value measurement guidance in U.S. generally accepted accounting principles and International Financial Reporting Standards. ASU 2011-04 clarifies the application of existing fair value measurement requirements, changes certain principles in Topic 820 and requires additional fair value disclosures. ASU 2011-04 is effective for annual periods beginning after December 15, 2011, and is not expected to have a significant impact on the Company’s consolidated financial position, results of operation, cash flows, or disclosures.

ASU 2011-05, “Comprehensive Income (Topic 220) - Presentation of Comprehensive Income.” ASU 2011-05 amends Topic 220, “Comprehensive Income,” to require that all non-owner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, ASU 2011-05 requires entities to present, on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement or statements where the components of net income and the components of other comprehensive income are presented. The option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. ASU 2011-05 is effective for annual and interim periods beginning after December 15, 2011; however, certain provisions related to the presentation of reclassification adjustments have been deferred by ASU 2011-12 “Comprehensive Income (Topic 220) - Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” as further discussed below. ASU 2011-05 is not expected to have a significant impact on the Company’s consolidated financial position, results of operation, cash flows, or disclosures.

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

ASU 2011-12 “Comprehensive Income (Topic 220) - Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” ASU 2011-12 defers changes in ASU No. 2011-05 that relate to the presentation of reclassification adjustments to allow the FASB time to redeliberate whether to require presentation of such adjustments on the face of the financial statements to show the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income. ASU 2011-12 allows entities to continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before ASU No. 2011-05. All other requirements in ASU No. 2011-05 are not affected by ASU No. 2011-12. ASU 2011-12 is effective for annual and interim periods beginning after December 15, 2011 and is not expected to have a significant impact on the Company’s consolidated financial position, results of operation, cash flows, or disclosures.

F-11

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Note 2:   Earnings Per Common Share

The following table presents the calculation of basic and diluted earnings per common share.

	Year Ended December 31,
	2011		2010
Net income	$	1,900	$	1,696
Weighted-average shares - Basic EPS		4,075,562		4,259,064
Weighted-average restricted shares -
2007 Deferred Compensation Plan		-		6,909
2008 Equity Incentive Plan		178,320		-
Weighted-average shares -
ESOP committed to be released - diluted EPS		98,899		29,120
Weighted-average shares - Diluted EPS		4,352,781		4,295,093
Basic earnings per common share	$	0.47	$	0.40
Diluted earnings per common share	$	0.44	$	0.39

Note 3:   Restriction on Cash and Due From Banks

The Bank is required to maintain reserve funds in cash and/or on deposits for certain correspondent relationships.  There was no reserve required, at December 31, 2011 or 2010.

F-12

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Note 4:   Securities

The amortized cost and approximate fair values of available-for-sale securities as of December 31, 2011 and 2010 are summarized below:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Approximate Fair Value
December 31, 2011
U.S. Treasury	$	4,692	$	1,383	$	-		$	6,075
U.S. Government agencies		8,000		22		-			8,022
Mortgage-backed securities		40,097		2,799		-			42,896
Collateralized mortgage obligations		2,611		-		(121)			2,490
State and political subdivisions		10,163		463		(7)			10,619
Corporate debt securities		2		175		-			177
Total	$	65,565	$	4,842	$	(128	)	$	70,279
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Approximate Fair Value
December 31, 2010
U.S. Treasury	$	4,730	$	1,363	$	-		$	6,093
U.S. Government agencies		7,999		38		(119)			7,918
Mortgage-backed securities		43,748		2,603		(2)			46,349
Collateralized mortgage obligations		3,993		87		-			4,080
State and political subdivisions		9,555		180		(18)			9,717
Corporate debt securities		18		39		-			57
Total	$	70,043	$	4,310	$	(139)		$	74,214

F-13

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

The mortgage-backed securities are backed by the Federal Home Loan Mortgage Corporation (“Freddie Mac”), Federal National Mortgage Association (“Fannie Mae”) and Government National Mortgage Association (“GNMA”).  None of the mortgage-backed securities are privately issued.

Collateralized mortgage obligations (“CMOs”) are mortgage derivatives and the CMOs owned by the Bank are classified as “low risk” under regulatory guidelines.  CMOs are subject to the effects of interest rate risk.  The Bank does not purchase CMOs at any significant premium over par value to limit certain prepayment risks.

The amortized cost and fair value of securities at December 31, 2011 and 2010, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	December 31, 2011				December 31, 2010
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Within one year	$	-	$	-	$	1,309	$	1,317
One to five years		5,698		7,183		297		309
Five to 10 years		2,608		2,811		8,822		10,291
After 10 years		17,162		17,389		15,867		15,948
		25,468		27,383		26,295		27,865
Mortgage-backed securities		40,097		42,896		43,748		46,349
Total	$	65,565	$	70,279	$	70,043	$	74,214

The carrying value of securities pledged as collateral to secure public deposits, borrowings and for other purposes, was $60,874 at December 31, 2011, and $68,995 at December 31, 2010.

Gross gains of $25 and $174 and gross losses of $-0- and $70 resulting from sales of securities were realized for the years ended December 31, 2011 and 2010, respectively.

Declines in fair value of available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses.  In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

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 of the Company’s U.S. Government agencies, mortgage-backed securities, state and political subdivisions and collateralized mortgage obligation investments are temporary.

The Company continuously assesses individual securities as part of its ongoing portfolio management, including the identification of other-than-temporary declines in fair value.  The other-than-temporary assessment includes reviewing the extent and duration of declines in fair values of investments, the seniority and duration of the securities, historical and projected company financial performance, company-specific news and other developments, the outlook for industry sectors, credit ratings and macro-economic changes, including government policy initiatives.

F-14

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

As of December 31, 2011,  management does not have the intent to sell any of the securities classified as available for sale in the table below and believes that it is more likely than not that the Company will not have to sell any such securities before recovery of fair value.  The unrealized losses are largely due to increases in market interest rates over yields available at the time the underlying securities were purchased.  The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline.  Management does not believe any of the securities are impaired due to reasons of credit quality.  Accordingly, as of December 31, 2011, management believes the impairments detailed in the table below are temporary and no other-than-temporary impairment should be recorded in the Company’s consolidated financial statements.

The following table shows the gross unrealized losses and fair value of securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2011 and 2010:

	December 31, 2011
	Less than 12 Months				12 Months or More				Total
Description of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Securities	Value		Losses		Value		Losses		Value		Losses
Collaterized mortgage obligations	$	2,490	$	(121)	$	-	$	-	$	2,490	$	(121)
State and political subdivisions		766		(7)		-		-		766		(7)
Total	$	3,256	$	(128)	$	-	$	-	$	3,256	$	(128)
	December 31, 2010
	Less than 12 Months				12 Months or More				Total
Description of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Securities	Value		Losses		Value		Losses		Value		Losses
U. S. Government agencies	$	6,881	$	(119)	$	-	$	-	$	6,881	$	(119)
Mortgage-backed securities		3,598		(2)		-		-		3,598		(2)
State and political subdivisions		1,252		(18)		-		-		1,252		(18)
Total	$	11,731	$	(139)	$	-	$	-	$	11,731	$	(139)

F-15

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Note 5:   Loans and Allowance for Loan Losses

Loans as of December 31, 2011 and 2010 are summarized below:

	At December 31,
	2011						2010
	Amount			Percent			Amount			Percent
Real estate loans:
Permanent loans:
One-to-four family	$	44,813			17.0	%	$	43,695			18.1	%
Multi-family		16,695			6.3			13,592			5.6
Nonresidential		98,278			37.3			77,089			31.9
Construction loans:
One-to-four family		18,618			7.1			20,373			8.4
Multi-family		2,357			0.9			357			0.1
Nonresidential		6,753			2.5			5,929			2.5
Land loans		25,409			9.6			26,394			10.9
Total real estate loans		212,923			80.7			187,429			77.5
Consumer:
Home equity loans and lines of credit		19,722			7.5			18,761			7.7
Auto loans		429			0.2			639			0.3
Deposit loans		321			0.1			377			0.2
Overdrafts		77			-			47			-
Other		1,828			0.7			2,193			0.9
Total consumer loans		22,377			8.5			22,017			9.1
Commercial loans		28,462			10.8			32,460			13.4
Total loans		263,762			100.0	%		241,906			100.0	%
Allowance for loan losses		(4,316	)					(3,649	)
Net deferred loan costs		88						89
Loans receivable, net	$	259,534					$	238,346

As of December 31, 2011, we recorded approximately $2.2 million of commercial loans and $2.2 million of short term borrowings in other liabilities on our balance sheet as a result of “failed sale” accounting treatment, under applicable accounting guidance, for certain transfers of financial assets.

F-16

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

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

Allowance for Loan Losses and Recorded Investment in Loans
For the Year Ended December 31, 2011
	One-to-Four		Multi-family/						Consumer
	Family		Nonresidential		Construction		Land		and Other		Commercial		Total
Allowance for loan losses:
Beginning balance	$	545	$	1,061	$	325	$	730	$	250	$	738	$	3,649
Charge offs		(18)		(9)		(32)		-		(45)		(236)		(340)
Recoveries		-		-		-		-		8		32		40
Provision (Credit)		(51)		11		107		(116)		83		933		967
Ending balance	$	476	$	1,063	$	400	$	614	$	296	$	1,467	$	4,316
Ending balance individually   evaluated for impairment	$	50	$	-	$	-	$	-	$	117	$	394	$	561
Ending balance collectively   evaluated for impairment	$	426	$	1,063	$	400	$	614	$	179	$	1,073	$	3,755
Loans:
Ending balance	$	44,813	$	114,973	$	27,728	$	25,409	$	22,377	$	28,462	$	263,762
Ending balance individually   evaluated for impairment	$	655	$	237	$	-	$	-	$	204	$	820	$	1,916
Ending balance collectively   evaluated for impairment	$	44,158	$	114,736	$	27,728	$	25,409	$	22,173	$	27,642	$	261,846

Allowance for Loan Losses and Recorded Investment in Loans
For the Year Ended December 31, 2010
	One-to-Four		Multi-family/						Consumer
	Family		Nonresidential		Construction		Land		and Other		Commercial		Total
Allowance for loan losses:
Beginning balance	$	280	$	1,125	$	160	$	286	$	200	$	762	$	2,813
Charge offs		(311)		-		-		-		(124)		(91)		(526)
Recoveries		4		-		-		-		12		12		28
Provision (Credit)		572		(64)		165		444		162		55		1,334
Ending balance	$	545	$	1,061	$	325	$	730	$	250	$	738	$	3,649
Ending balance individually   evaluated for impairment	$	195	$	-	$	-	$	71	$	-	$	-	$	266
Ending balance collectively   evaluated for impairment	$	350	$	1,061	$	325	$	659	$	250	$	738	$	3,383
Loans:
Ending balance	$	43,695	$	90,681	$	26,659	$	26,394	$	22,017	$	32,460	$	241,906
Ending balance individually   evaluated for impairment	$	461	$	249	$	-	$	292	$	160	$	213	$	1,375
Ending balance collectively   evaluated for impairment	$	43,234	$	90,432	$	26,659	$	26,102	$	21,857	$	32,247	$	240,531

F-17

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

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

Credit Quality Indicators as of December 31, 2011
	One-to-Four		Multi-family/						Consumer
	Family		Nonresidential		Construction		Land		and Other		Commercial		Total
Corporate Credit Exposures
Credit Risk Profile by  Internally Assigned Grade
Grade:
Pass	$	41,534	$	111,213	$	26,403	$	25,195	$	21,971	$	27,353	$	253,669
Special mention		840		1,398		137		168		163		472		3,178
Substandard		2,439		2,362		1,188		46		243		426		6,704
Doubtful		-		-		-		-		-		211		211
Total	$	44,813	$	114,973	$	27,728	$	25,409	$	22,377	$	28,462	$	263,762

Credit Quality Indicators as of December 31, 2010
	One-to-Four		Multi-family/						Consumer
	Family		Nonresidential		Construction		Land		and Other		Commercial		Total
Corporate Credit Exposures
Credit Risk Profile by  Internally Assigned Grade
Grade:
Pass	$	41,389	$	87,570	$	25,413	$	25,864	$	21,637	$	31,703	$	233,576
Special mention		794		1,904		720		192		70		103		3,783
Substandard		1,512		1,207		526		338		310		442		4,335
Doubtful		-		-		-		-		-		212		212
Total	$	43,695	$	90,681	$	26,659	$	26,394	$	22,017	$	32,460	$	241,906

Credit risk by internally assigned grade

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

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

F-18

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

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

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

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

Credit risk by payment activity

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

The following table shows an aging analysis of past due loans as of December 31, 2011 and 2010:

Age Analysis of Past Due Loans
As of December 31, 2011
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans		Loans >90 Days and Accruing
One-to-four family	$	889	$	172	$	1,300	$	2,361	$	42,452	$	44,813	$	-
Multifamily/nonresidential		-		237		-		237		114,736		114,973		-
Construction		292		-		-		292		27,436		27,728		-
Land		-		-		-		-		25,409		25,409		-
Consumer and other		303		23		159		485		21,892		22,377		-
Commercial		269		189		385		843		27,619		28,462		-
Total		1,753		621		1,844		4,218		259,544		263,762		-

Age Analysis of Past Due Loans
As of December 31, 2010
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans		Loans >90 Days and Accruing
One-to-four family	$	675	$	168	$	693	$	1,536	$	42,159	$	43,695	$	-
Multifamily/nonresidential		-		-		-		-		90,681		90,681		-
Construction		-		-		-		-		26,659		26,659		-
Land		-		-		541		541		25,853		26,394		-
Consumer and other		661		137		436		1,234		20,783		22,017		-
Commercial		-		-		-		-		32,460		32,460		-
Totals		1,336		305		1,670		3,311		238,595		241,906		-

F-19

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

The following tables set forth details regarding impaired loans at December 31, 2011 and 2010:

Impaired Loans
For the Year Ended December 31, 2011
	Recorded Investment		Unpaid Principal Blance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
One-to-four family	$	-	$	-	$	-	$	-	$	-
Multifamily/nonresidential		237		237		-		237		-
Construction		-		-		-		-		-
Land		-		-		-		-		-
Consumer and other		-		-		-		-		-
Commercial		166		218		-		166		-
Subtotal		403		455		-		403		-
With an allowance recorded:
One-to-four family		655		655		50		659		28
Multifamily/nonresidential		-		-		-		-		-
Construction		-		-		-		-		-
Land		-		-		-		-		-
Consumer and other		203		203		117		204		7
Commercial		655		675		394		596		22
Subtotal		1,513		1,533		561		1,459		57
Total:
One-to-four family		655		655		50		659		28
Multifamily/nonresidential		237		237		-		237		-
Construction		-		-		-		-		-
Land		-		-		-		-		-
Consumer and other		203		203		117		204		7
Commercial		821		893		394		762		22
Total	$	1,916	$	1,988	$	561	$	1,862	$	57

F-20

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Impaired Loans
For the Year Ended December 31, 2010
	Recorded Investment		Unpaid Principal Blance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
One-to-four family	$	-	$	-	$	-	$	-	$	-
Multifamily/nonresidential		249		249		-		252		5
Construction		-		-		-		-		-
Land		-		-		-		-		-
Consumer and other		160		160		-		160		6
Commercial		212		270		-		251		5
Subtotal		621		679		-		663		16
With an allowance recorded:
One-to-four family		461		461		195		465		23
Multifamily/nonresidential		-		-		-		-		-
Construction		-		-		-		-		-
Land		292		292		71		292		5
Consumer and other		-		-		-		-		-
Commercial		-		-		-		-		-
Subtotal		753		753		266		757		28
Total:
One-to-four family		461		461		195		465		23
Multifamily/nonresidential		249		249		-		252		5
Construction		-		-		-		-		-
Land		292		292		71		292		5
Consumer and other		160		160		-		160		6
Commercial		212		270		-		251		5
Total	$	1,374	$	1,432	$	266	$	1,420	$	44

No interest was recognized on impaired loans on a cash basis during the years ended December 31, 2011 and 2010.

The following table sets forth loans on nonaccrual status as of December 31, 2011 and 2010:

Nonaccrual Loans
	December 31,
	2011		2010
One-to-four family	$	2,135	$	1,266
Multifamily/nonresidential		-		541
Construction		-		-
Land		-		541
Consumer and other		254		240
Commercial		399		397
	$	2,788	$	2,985

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.  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 $68 in 2011 and $57 in 2010.

F-21

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

The following tables set forth information about modifications which were considered troubled debt restructurings (“TDRs”) as of December 31, 2011 and December 31, 2010.

Modifications
As of December 31, 2011
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings
One-to-four family		1	$	168	$	165
Consumer and Other		1	$	40	$	40
Commercial		2	$	237	$	231
Troubled Debt Restructurings That Subsequently Defaulted	Number of Contracts		Pre-Modification Outstanding Recorded Investment
Troubled debt restructurings
One-to-four family		1	$	168

Modifications
As of December 31, 2010
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings
Commercial		1	$	178	$	178
Troubled Debt Restructurings That Subsequently Defaulted	Number of Contracts		Pre-Modification Outstanding Recorded Investment
Troubled debt restructurings
Commercial		-	$	-

Loans characterized as TDRs totaled $436 at December 31, 2011, compared to $178 at December 31, 2010. The allowance allocated to TDRs, excluding specifically-impaired loans referred to above, totaled $0 at both December 31, 2011 and 2010. The TDR total at December 31, 2011 is comprised of four loans.  One is comprised of a single commercial real estate loan, which was identified as a TDR at December 31, 2011 and 2010, for which the Company agreed to accept interest only payments for one year and will be removed from TDR status during the first quarter of 2012, upon return to amortization status.  The remaining TDRs consist of one single family residential loan in the amount of $165, which was restructured, has subsequently failed to perform under the restructured terms, and has been referred to counsel for foreclosure, and two TDRs that consist of one consumer and one commercial which total $99 and are both paying as agreed under the restructured terms.

F-22

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Note 6:   Premises and Equipment

Major classifications of premises and equipment, stated at cost, were as follows:

		December 31,
	Estimated Useful Lives	2011		2010
Land		$	2,503	$	2,503
Land improvements	7 to 15 years		120		120
Buildings and improvements	7 to 40 years		4,791		4,787
Furniture, fixtures and equipment	3 to 10 years		4,109		3,748
Construction in progress			88		-
			11,611		11,158
Less accumulated depreciation and amortization			4,107		3,605
Net premises and equipment		$	7,504	$	7,553

Note 7:   Other Assets Held for Sale

At December 31, 2011 other assets held for sale totaled $532 and consisted of two former branch locations.  During July 2009 the Bank closed its downtown drive-thru location and during February 2009 the new St. Bethlehem Branch opened and the former St. Bethlehem location was closed concurrently.  Both properties were measured for impairment at the time of their respective closing and reclassified to other assets held for sale and are recorded in other real estate owned and repossessed assets on the balance sheet.  The Bank ceased recording depreciation on both properties on their respective reclassification dates.

Note 8:   Deposits

Year-end deposits were as follows:

	December 31,
	2011		2010
Non-interest bearing demand deposits	$	28,062	$	19,681
Interest bearing deposits:
Savings		44,003		41,770
Checking		59,430		58,753
Money market		30,927		20,336
Certificates of deposit		70,162		78,964
Total interest bearing deposits		204,522		199,823
Total deposits	$	232,584	$	219,504

F-23

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Presented below is a summary of interest expense by each significant category of deposits:

	December 31,
	2011		2010
NOW	$	378	$	595
Money market		261		245
Savings		349		463
Time deposits		1,149		1,889
Total interest expense	$	2,137	$	3,192

At December 31, 2011, the scheduled maturities of time deposit were as follows:

2012	$	47,886
2013		18,813
2014		1,795
2015		850
2016		815
2017 and thereafter		3
	$	70,162

Scheduled maturities of time deposits in amounts of $100,000 or more, at December 31, 2011, were as follows:

Due within three months or less	$	6,119
Due after three months and within six months		7,970
Due after six months and within twelve months		7,936
Due after twelve months		6,917
	$	28,942

F-24

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Note 9:   Borrowed Funds

Short- term borrowings.  Short-term borrowings consist of Federal Home Loan Bank (“FHLB”) overnight advances and federal funds purchased and securities sold under agreements to repurchase.  Federal funds purchased are short-term borrowings that typically mature within one to ninety days and reprice daily.  As of December 31, 2011 and 2010 the balances of short-term advances from FHLB were $10,500  and $-0-, respectively.  Securities sold under agreements to repurchase consist of customer funds that are invested overnight in investment securities.   The following table shows the distribution of short-term borrowings, the weighted average interest rates thereon and the maximum month-end balance at the end of each of the last two years.

FHLB Short Term Advances	December 31, 2011			December 31, 2010
Balance at Year End	$	10,500		$	-
Weighted Avg Rate at Year End		0.049	%		-	%
Average Balance During the Year		682			-
Weighted Avg Rate During the Year		0.073	%		-	%
Maximum month-end Balance		10,500			-
Fed Funds Purchased
Balance at Year End	$	-		$	-
Weighted Avg Rate at Year End		-			-
Average Balance During the Year		66			73
Weighted Avg Rate During the Year		1.27	%		1.18	%
Maximum month-end Balance		-			-
Securities Sold Under Agreements to Repurchase
Balance at Year End	$	4,176		$	6,215
Weighted Avg Rate at Year End		0.74	%		1.49	%
Average Balance During the Year		5,475			6,250
Weighted Avg Rate During the Year		1.69	%		1.75	%
Maximum month-end Balance		10,044			10,441

Other short-term borrowings include our liability related to mortgage loans available for repurchase under GNMA optional repurchase programs.  As of December 31, 2011, we recorded approximately $2.2 million of commercial loans and $2.2 million of short-term borrowings in other liabilities on our balance sheet, respectively, as a result of “failed sale” accounting treatment, under the applicable accounting literature, for certain transfers of financial assets.

Federal Home Loan Bank Long Term Borrowings.  The Bank had fixed rate putable advances maturing on January 14, 2015 in the amount of $13,000, putable on January 14, 2010 and quarterly thereafter, with a weighted average rate of 2.99%.  Pursuant to collateral agreements with the FHLB, non-repurchase advances and other overnight facilities, which the Bank utilizes, are secured by qualifying first mortgage loans, commercial real estate, FHLB stock and interest-bearing demand deposits with the FHLB.

Structured Repurchase Agreements.  In a leverage strategy, on April 30, 2008, the Bank entered into two balance sheet leverage transactions (which consisted of four separate repurchase agreements, as set forth below) whereby it borrowed a total of $35,000 in multiple rate repurchase agreements with an initial average cost of 3.67% and invested the proceeds in U. S. Agency pass-through Mortgage Backed Securities (the “Securities”), which were pledged as collateral.  The Bank secured the borrowed funds by Securities valued at 116% of the outstanding principal balance of the borrowings.  The borrowings have original maturity dates ranging from four to ten years, with a weighted average maturity of 5.9 years and certain borrowings have a call option starting with periods ranging from one to two years after origination and are continuously callable after the initial call date.  During the loan term, any collateral that is subject to maturity or call is replaced with other U. S. Agency instruments approved by the lender.

F-25

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

A summary of the material terms of each agreement is set forth below.

Ten Year Non-Putable Three Year Liability Side Structured Repurchase Agreement.  The Bank agreed to transfer approximately $11,800 of U. S. Agency pass-through Mortgage Backed Securities as collateral for a $10,000 repurchase facility, bearing interest at market rates.  The termination for the repurchase facility is April 30, 2018, subject to early cancellation.

Ten Year Non-Putable Two Year Liability Side Structured Repurchase Agreement.  The Bank agreed to transfer approximately $5,900 of U. S. Agency pass-through Mortgage Backed Securities as collateral for a $5,000 repurchase facility, bearing interest at market rates.  The termination for the repurchase facility is April 30, 2018, subject to early cancellation.

Five Year Non-Putable Three Year Bermudan Structured Repurchase Agreement.  The Bank agreed to transfer approximately $11,800 of U. S. Agency pass-through Mortgage Backed Securities as collateral for a $10,000 repurchase facility, bearing interest at market rates.  The termination for the repurchase facility is April 30, 2013, subject to early cancellation.

Four Year Liability Side Structured Repurchase Agreement. The Bank agreed to transfer approximately $10,900 of U. S. Agency pass-through Mortgage Backed Securities as collateral for a $10,000 repurchase facility, bearing interest at market rates.  The termination for the repurchase facility is April 30, 2012.

Term Repurchase Agreements:
Repurchase agreement - rate 3.28%, due April 30, 2018, callable after April 30, 2011	$	10,000
Repurchase agreement - rate 2.96%, due April 30, 2018, callable after April 30, 2010		5,000
Structured repurchase agreement - rate 3.71%, due April 30, 2013, callable after   April 30, 2011, with embedded interest cap at LIBOR of 3.50% starting April 30, 2010		10,000
Structured repurchase agreement - rate 4.39%, due April 30, 2012, with embedded    interest cap at LIBOR of 3.50% starting April 30, 2010		10,000
	$	35,000

Note 10:   Income Taxes

The Company files federal and Tennessee state income tax returns. The federal income tax returns for 2007 and later years, and the Tennessee income tax returns for 2008 and later years are still subject to federal, state, local, or non-US income tax examinations by tax authorities.

When income and expenses are recognized in different periods for tax purposes, applicable deferred taxes are provided in the consolidated financial statements.  If necessary, we recognize interest and penalties accrued relative to unrecognized tax benefits in their respective federal or state income tax accounts.  As of December 31, 2011, the Company did not have any liabilities recorded for uncertain tax positions.

Income tax expense consists of the following:

		Year Ended December 31,
		2011		2010
Current income taxes:
Federal	$	1,150	$	664
State		(93)		-
Deferred income taxes:
Federal		(236)		126
State		300		178
Income tax expense	$	1,121	$	968

F-26

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

A reconciliation of income tax expense at the statutory rate to the Bank’s actual income tax expense is shown below:

	Year Ended December 31,
	2011					2010
	Dollars		%			Dollars		%
Computed at the statutory rate (34%)	$	1,027		34.00	%	$	906		34.00	%
Increase (decrease) resulting from:
State income taxes, net of federal effect		141		4.68			118		4.42
Tax-exempt interest income, net		(104)		(3.46)			(82)		(3.08)
Reduction of liability for uncertain tax positions		-		-			(68)		(2.55)
Other		57		1.88			94		3.53
Income tax expense	$	1,121		37.10	%	$	968		36.32	%

The tax effects of temporary differences related to deferred taxes shown on the balance sheets were:

	December 31,
	2011			2010
Deferred tax assets:
Allowance for loan losses	$	1,633		$	1,384
Deferred compensation		783			1,125
Net operating loss carryforward		-			213
Other-than-temporary impairment		1,874			1,874
Other		747			422
		5,037			5,018
Deferred tax liabilities:
FHLB dividends		(953	)		(953	)
Unrealized gains on available-for-sale securities		(1,805	)		(1,597	)
Depreciation		(352	)		(269	)
		(3,110	)		(2,819	)
Net deferred tax asset	$	1,927		$	2,199

No valuation allowance for deferred tax assets was recorded at December 31, 2011 and 2010 as management believes it is more likely than not that all of the deferred tax assets will be realized through either recoverable taxes paid in prior years or off-set of future earnings.

Retained earnings at December 31, 2011 and 2010 includes approximately $3,633 of which no provision for federal income taxes has been made.  This amount represents the tax bad debt reserve at December 31, 1987, defined as the base year reserve, which pursuant to the Tax Reform Act of 1986 was not required to be recaptured into taxable income.  If this portion of retained earnings is used in the future for any other purpose than to absorb bad debts, the amount used will be added to future taxable income. The deferred tax liability on the above amount at December 31, 2011 and 2010, if recorded, would be approximately $1,224.

As of December 31, 2010, the Company had state net operating loss carry-forward totaling $2,663 available to offset future taxable income and has been fully utilized.  On November 9, 2009, the Worker, Homeownership and Business Assistance Act was signed into law.  This act extended a five year net operating loss carryback that had previously been available to only small businesses.  The Company has filed the appropriate return with the Internal Revenue Service to carryback a federal 2008 net operating loss to 2005 resulting in the recognition of a current tax benefit of $2,290 in income taxes receivable.

F-27

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Note 11:   Other Comprehensive Income

Total comprehensive income is reported in the accompanying statements of changes in shareholders’ equity.  Information related to net other comprehensive income is as follows:

	December 31,
	2011			2010
Net income	$	1,900		$	1,696
Unrealized gains on available-for-sale securities		331			297
Less reclassification adjustment for realized gains included in income		(25	)		(104	)
Other comprehensive gains, before tax effect		306			193
Tax expense		117			74
Other comprehensive income		189			119
Comprehensive income	$	2,089		$	1,815

Note 12:   Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices.  The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

The Bank is subject to restrictions on the amount of dividends it may declare without the prior approval of the TDFI.  Under Tennessee law, the amount of dividends that may be paid in any year is limited to that year's net income, combined with the retained net income of the preceding two years.  As of January 1, 2012,  the Bank would have the ability to pay $2,055 in dividends to the Company, without regulatory approval.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum capital amounts and ratios (set forth in the table below).  Management believes, as of December 31, 2011 and 2010, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2011 and 2010, the most recent notification from the regulatory agencies categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.  To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the table.  There are no conditions or events since that notification that management believes have changed the Bank’s category.

F-28

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

The Bank’s actual capital amounts and ratios are presented in the table.

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2011
Total risk-based capital	$	53,238		19.03	%	$	22,386		8.00	%	$	27,983		10.00	%
(to risk-weighted assets)
Tier I capital		50,447		17.96			11,193		4.00			16,790		6.00
(to risk-weighted assets)
Tier I capital		50,447		13.88			14,534		4.00			18,167		5.00
(to adjusted total assets)
Tangible capital		50,447		13.88			5,450		1.50			N/A		N/A
(to adjusted tangible assets)
As of December 31, 2010
Total risk-based capital	$	50,243		19.24	%	$	20,890		8.00	%	$	26,112		10.00	%
(to risk-weighted assets)
Tier I capital		47,568		18.20			10,445		4.00			15,667		6.00
(to risk-weighted assets)
Tier I capital		47,568		13.89			13,701		4.00			17,127		5.00
(to adjusted total assets)
Tangible capital		47,568		13.89			5,138		1.50			N/A		N/A
(to adjusted tangible assets)

Below is a reconciliation of GAAP and regulatory capital amounts:

	December 31,
	2011		2010
Total equity per the Bank financial statements	$	53,210	$	50,142
Unrealized gains on available-for-sale securities   included in accumulated other comprehensive income		(2,763)		(2,574)
Tier 1 capital		50,447		47,568
Allowance for loan losses includable in Tier 2 capital		3,501		3,264
Equity investments and other assets required to be deducted		(710)		(589)
Total risk-based capital	$	53,238	$	50,243

F-29

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Note 13:   Related-Party Transactions

At December 31, 2011 and 2010, the Bank had loans outstanding to executive officers, directors and their related interests (related parties), in the amount of $11,184 and $10,498, respectively.

In management’s opinion, such loans and other extensions of credit and deposits were made in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons.  Further, in management’s opinion, these loans did not involve more than normal risk of collectibility or present other unfavorable features.

	December 31,
	2011			2010
Beginning balance	$	10,498		$	9,103
New loans and advances		11,266			6,863
Repayments		(10,580	)		(5,468	)
Ending balance	$	11,184		$	10,498

Excluding the holding company demand deposit account, deposits from related parties held by the Bank, at December 31, 2011 and 2010, totaled $3,051 and $2,488, respectively.

Note 14:   Employee Benefits

First Advantage Bank 401(k) and Profit Sharing Plan

The Bank has a retirement savings 401(k) and profit-sharing plan covering substantially all employees.  Employees may contribute up to 100% of their compensation, up to allowable limits, with the Bank matching up to three percent on a discretionary basis (no required contributions) based on profitability and other factors.  Participants are fully vested in any deferrals and vest in any employer contributions at a rate of 20% per year of service, with full vesting after five years of service.  Employer contributions charged to expense for the years ended December 31, 2011 and 2010, were $110 and $125, respectively.  The plan was established in 2005.

First Advantage Bank Deferred Compensation Plans

The Bank has a nonqualified deferred compensation agreement with certain retired directors ending December 2012.  The charge to expense related to the agreement was $2 for the years ended December 31, 2011 and 2010, respectively.  Deferred compensation payable under this agreement totaled $62 and $136 as of December 31, 2011 and 2010, respectively.

1998 Nonqualified Deferred Compensation Plan

The Bank has a nonqualified deferred compensation plan for certain active and retired directors and certain retired and active officers.  Interest accrues on the deferred amounts at a rate tied to the rate paid by the Bank on one year certificate accounts at the beginning of each plan year.  During the initial public offering, participants were given a one-time option to move from the 1998 Nonqualified Deferred Compensation Plan to the new Nonqualified Deferred Compensation Plan.  All active participants elected the one-time option.  The remaining retired directors and officers are receiving annual payments under the terms of the deferred compensation plan.  The charge to expense for the agreement was $4 and $8 for the years ended December 31, 2011 and 2010, respectively.  Deferred compensation payable for this plan totaled $384 and $467 as of December 31, 2011 and 2010, respectively.

F-30

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

2007 Deferred Incentive Plan

On January 1, 2007, the Bank implemented a nonqualified deferred compensation agreement with certain executive officers, senior management and other key employees.  The agreement provides the Bank will make contributions to the plan that will vest over a three to five year period.  During the initial public offering participants were given a one-time option to move from the 2007 Deferred Incentive Plan to the new Nonqualified Deferred Compensation Plan.  All participants elected to participate in the Nonqualified Deferred Compensation Plan.  The 2007 Deferred Incentive Plan had no participants during the years ended December 31, 2011 and 2010.

Nonqualified Deferred Compensation Plan

Effective October 1, 2007, the Bank implemented a deferral plan with certain directors, executive officers, senior management and other key employees.  The plan allowed participants the option to convert other cash based deferred compensation plan awards to the new Nonqualified Deferred Compensation Plan.  Amounts transferred into the new Nonqualified Deferred Compensation Plan from the Bank’s other deferred compensation plans, which were approximately $1,500, were used by the plan to purchase shares of the Company’s stock from its initial public offering.  The provision of the conversion was a one-time event for previous plans.  Additionally directors can elect to contribute fees earned to the plan and are 100% vested.  Employees will vest based on the vesting requirements of the 2007 Deferred Incentive Plan.  The charge to expense for this plan was $138 and $197 for 2011 and 2010, respectively.  Purchased stock recorded as a contra equity account was $1,845, or 187,593 shares, and $1,810, or 178,972 shares, as of December 31, 2011 and 2010, respectively, of which $1,600 and $1,085 was 100% vested by participants as of December 31, 2011 and 2010, respectively.  All participants were 100% vested as of December 31, 2011.   At December 31, 2011 there were 23,974 shares available for award under the plan.

	Number of Shares Awarded		Weighted-Average Fair Value
Non-vested stock as of January 1, 2010		81,763	$	10.07
Purchased		9,395		11.07
Vested		24,173		10.12
Forfeited		7,750		10.12
Non-vested stock as of December 31, 2010		59,235		10.12
Purchased		8,620		13.18
Vested		56,798		10.26
Forfeited		11,057		10.26
Non-vested stock as of December 31, 2011		-	$	-

Total unrecognized compensation cost related to nonvested compensation arrangements purchased under the Plan was $0 and $242 as of December 31, 2011 and 2010, respectively.

The Nonqualified Deferred Compensation Plan provides for fixed payments or a lump sum payment in shares of common stock of the Company after termination from service as defined under Section 409A of the Internal Revenue Code.  The common stock purchased for this Nonqualified Deferred Compensation Plan is maintained in a Rabbi Trust (“Trust”), on behalf of the participants.  The assets of the Trust are subject to the claims of general creditors of the Company.  Dividends payable on the common stock held by the Trust are reinvested in additional shares of common stock of the Company and held in the Trust for the benefit of the participants.  Since the Nonqualified Deferred Compensation Plan does not provide for diversification of the Trust’s assets and can only be settled with a fixed number of shares of the Company’s common stock, the deferred compensation obligation is classified as a component of shareholders’ equity.  Subsequent changes in the fair value of common stock are not reflected in earnings or shareholders’ equity of the Company.  The obligations of the Company under the Nonqualified Deferred Compensation Plan, and the shares held by the Trust, have no effect on net income.

F-31

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Employee Stock Ownership Plan (ESOP)

The Company sponsors a leveraged ESOP that covers substantially all employees who meet certain age and eligibility requirements.  As part of the initial public offering the ESOP purchased 421,174 shares, or approximately 8% of the 5,264,683 shares issued in the offering with the proceeds of a 20-year loan from the Company which is payable in annual installments and bears interest at a rate of 7.5% per annum.

The Bank has committed to make contributions to the ESOP sufficient to support the debt service of the loan.  The loan is secured by the unallocated shares, which are held in a suspense account, and are allocated among the participants as the loan is repaid.  Cash dividends paid on allocated shares are distributed to the participants and cash dividends paid on unallocated shares are used to repay the outstanding debt of the ESOP.

ESOP shares are held by the plan trustee in a suspense account until allocated to participant accounts.  Shares released from the suspense account are allocated to participants on the basis of their relative compensation in the year of allocation.  Participants become vested in the allocated shares over a period of six years.  Any forfeited shares are allocated to other participants in the same proportion as contributions.  The Bank is obligated at the option of each beneficiary to pay out their vested allocations in either shares or cash upon the beneficiary’s termination or after retirement.

As ESOP shares are earned by the participants, the Company recognizes compensation expense equal to the fair value of the earned ESOP shares.  Total compensation expense for the years ended December 31, 2011 and 2010 was $273 and $227, respectively.  The ESOP shares as of December 31, 2011 and 2010 were as follows:

	2011		2010
Allocated shares		93,163		68,898
Repurchased shares of beneficiaries		7,955		2,088
Shares committed to be allocated		26,587		26,353
Unreleased shares		298,809		325,396
Total ESOP shares		410,604		418,559
Fair value of unreleased shares at December 31	$	3,848	$	3,947

F-32

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

2008 Equity Incentive Plan

The First Advantage Bancorp 2008 Equity Incentive Plan (“the 2008 Plan”) was approved by the Company’s stockholders at the annual meeting of stockholders held on June 11, 2008.  Under the terms of the 2008 Plan, the Company may grant stock awards and stock options to its employees, officers and directors.  The purpose of the 2008 Plan is to promote the success of the Company by linking the personal interests of its employees, officers and directors to the interests of the Company’s shareholders, and by providing participants with an incentive for remarkable performance.  All of the Company’s employees, officers and directors are eligible to participate in the 2008 Plan.  A committee appointed by the Board of Directors of the Company (which consists of at least two independent directors) (the “Committee”) serves as administrator of the 2008 Plan.  The Committee has sole authority to designate participants; determine the type or types of awards to be granted to each participant and the number, terms and conditions of awards; establish, adopt or revise any rules and regulations as it may deem advisable to administer the 2008 Plan; and make all other decisions and determinations that may be required under the 2008 Plan.

The restricted common stock awards vest at a rate of 20% per year from the date of grant.  The fair market value of the stock awards is based on the market price of the company’s stock at the date of grant.

There were 55,279 stock options exercised during 2011.  There were no stock option exercises during 2010.  The total intrinsic value of options exercised during the year ended 2011 and 2010 was $126 and -0-, respectively.  The weighted-average grant-date fair value of options granted was $2.34 for 2011 and 2010, respectively. We use shares repurchased under a repurchase program for share issuances upon exercise of options.

Both incentive stock options and non-qualified stock options were granted under the Plan.  The exercise price for each option was equal to the market price of the Company’s stock on the date of grant and the maximum term of each option is ten years.  The vesting period for all options is five years from the date of grant.  The Company recognizes compensation expense over the vesting period, based on the grant-date fair value of the options granted.  The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model.

A summary of the activity in the 2008 Plan as of December 31, 2011, is presented in the following table:

			Non-Vested Stock				Stock Options
			Awards Outstanding				Outstanding
					Weighted-				Weighted-
	Shares				Average				Average
	Available		Number		Grant-Date		Number		Exercise
	for Grant		of Shares		Fair Value		of Shares		Price
Balance, December 31, 2010		34,831		120,953	$	10.29		502,837	$	10.29
Granted		-		-		-		5,000		13.82
Stock options exercised		-		-		-		(55,279)		10.29
Stock awards vested				(29,061)		10.29		-		-
Forfeited		121,687		(33,768)		10.29		(87,919)		10.29
Balance, December 31, 2011		156,518		58,124	$	10.29		364,639	$	10.29

F-33

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Other information regarding options outstanding and exercisable as of December 31, 2011, is as follows:

	Options Outstanding			Options Exercisable
			Weighted-
			Average
		Weighted-	Remaining		Weighted-
		Average	Contractual	Number	Average
	Number	Exercise	Life	of	Exercise
Range of Exercise Prices	of Shares	Price	in Years	Shares	Price
$10.03   -   $13.82	364,639	$                 10.34	7.1	213,783	$       10.28

The fair value of the 2008 Plan stock options granted is estimated on the measurement date, which, for the Company, is the date of grant using the Black-Scholes option-pricing model.  The weighted-average assumptions used to determine the fair value of options granted in 2011 and 2010 are detailed in the table below:

Risk-free interest rate	3.49%
Dividend yield	2.00%
Expected market price volatility	22.07%
Expected life	6.5 Years

The total intrinsic value of vested stock options at December 31, 2011 was $507.  The total intrinsic value of non-vested stock options at December 31, 2011 was $358.

The fair value of non-vested restricted stock awards for the purposes of recognizing stock-based compensation expense is the market price of the stock award on the measurement date, which, for the Company, is the date of the award.

Stock-based compensation expense totaled $431 in 2011 and $653 in 2010.  Stock-based compensation is recognized ratably over the requisite service period for all awards.  The total income tax benefit recognized in the accompanying consolidated statements of income related to stock-based compensation was approximately $165 in 2011 and $250 in 2010.  Unrecognized stock-based compensation expense related to stock options totaled $292 at December 31, 2011.  At December 31, 2011, the weighted-average period over which the unrecognized expense related to stock options was expected to be recognized was 1.6 years.  Unrecognized stock-based compensation expense related to non-vested restricted awards was $490 at December 31, 2011.  At December 31, 2011, the weighted-average period over which unrecognized expense related to restricted stock awards was expected to be recognized was 1.6 years.

F-34

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Note 15:   Disclosures About Fair Value of Financial Instruments

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

Available-for-Sale Securities

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

Fair Value of Assets Measured on a Recurring Basis

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

December 31, 2011	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Available for sale securities:
U.S. Treasury	$	6,075	$	6,075	$	-	$	-
U.S. Government agencies		8,022		-		8,022		-
Mortgage-backed securities		42,896		-		42,896		-
Collateralized mortgage obligations		2,490		-		2,490		-
State and political subdivisions		10,619		-		10,619		-
Corporate debt securities		177		-		-		177

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

F-35

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

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

Activity in assets measured using Level 3 inputs during the year was as follows:
Balance, January 1, 2010	$	30
Other-than-temporary impairment charges included in non-interest income		(12)
Payments and settlements		39
Balance, December 31, 2010	$	57

Fair Value of Assets Measured on a Nonrecurring Basis

Certain assets may be recorded at fair value on a nonrecurring basis.  These nonrecurring fair value adjustments typically result from the application of lower of cost or market accounting or a write-down occurring during the period.  The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value of the related individual assets as of December 31, 2011.  There were no nonrecurring fair value adjustments for the period ending December 31, 2010.

December 31, 2011	Level 1	Level 2	Level 3		Nonrecurring Fair Value Adjustments  Twelve Months Ended December 31, 2011
Impaired loans			$	1,513	$	(561)
Other real estate owned				1,391		( 38)

F-36

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

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

Mortgage Loans Held For Sale

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

Other Assets Held for Sale

Other assets held for sale represents real estate that is not intended for use in operations and recorded at lower of cost or estimated fair value on a nonrecurring basis. Fair value is based upon independent market prices, appraised values or management’s estimation of the value. When the fair value is based on an observable market price or current appraised value, the Company classifies the asset as Level 2.  They are recorded at cost in the consolidated balance sheets at December 31, 2011 and 2010

Other Real Estate Owned and Repossessed Assets

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

Impaired Loans

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

F-37

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

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

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

	At December 31,
	2011						2010
	Carrying Amount			Fair Value			Carrying Amount		Fair Value
Financial assets
Cash and cash equivalents	$	10,756		$	10,756		$	7,788	$	7,788
Other investments		-			-			3,486		3,486
Available-for-sale securities		70,279			70,279			74,214		74,214
Loans held for sale		5,509			5,509			3,155		3,155
Loans, net of allowance for loan losses		259,534			262,715			238,346		237,770
FHLB stock		2,988			2,988			2,988		2,988
Forward sale commitments		(2	)		(2	)		21		21
Financial liabilities
Deposits	$	232,584		$	232,841		$	219,504	$	219,808
Securities sold under agreement to repurchase		4,176			4,176			6,215		6,215
FHLB advances		23,500			24,329			13,000		13,790
Long term debt		35,000			37,478			35,000		37,455
Interest rate lock commitments		(1	)		(1	)		21		21

General

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

Cash and Cash Equivalents and Interest Receivable

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

Federal Home Loan Bank Stock

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

Other Investments

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

F-38

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

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

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

Deposits

Deposits include non-interest bearing checking accounts and interest bearing deposits, including savings accounts, checking accounts and money market deposits.  The carrying amount for these 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.

Federal Home Loan Bank Advances and Other Long-term Debt

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

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.

F-39

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Note 16:   Commitments and Credit Risk

Commitments to Originate Loans

Commitments to originate loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments have fixed expiration dates or other termination clauses and may require payment of a fee.  Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  Each customer’s creditworthiness is evaluated on a case-by-case basis.  The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty.  Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

At December 31, 2011 and 2010, the Bank had outstanding commitments to originate loans aggregating $2,368 and $1,438, respectively.  The commitments extended over varying periods of time with the majority being disbursed within a one-year period.

Mortgage loans in the process of  origination represent amounts that the Bank plans to fund within a normal period of 60 to 90 days, and which are intended for sale to investors in the secondary market.  Total mortgage loans in the process of origination amounted to approximately $855 and $2,527, and mortgage loans held for sale amounted to $5,509 and $3,155 at December 31, 2011 and 2010, respectively.

The Bank had recourse commitments on loans sold on the secondary market of approximately $10,839 and $19,481 at December 31, 2011 and 2010, respectively.  Recourse provisions expire within one to six months from the date of transfer.

Standby Letters of Credit

Standby letters of credit are irrevocable conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.  Financial standby letters of credit are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions.  Performance standby letters of credit are issued to guarantee performance of certain customers under non-financial contractual obligations.  The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers.  Should the Bank be obligated to perform under the standby letters of credit, the Bank may seek recourse from the customer for reimbursement of amounts paid.

The Bank had total outstanding standby letters of credit amounting to $1,076 and $482 at December 31, 2011 and 2010, respectively, with terms generally ranging from 90 days to 13 months.

Lines of Credit

Lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Lines of credit have fixed expiration dates.  Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements.  Each customer’s creditworthiness is evaluated on a case-by-case basis.  The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty.  Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.  Management uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments.

At December 31, 2011, the Bank had granted unused lines of credit to borrowers aggregating approximately $31,083 and $11,311 for commercial lines and open-end consumer lines, respectively.  At December 31, 2010, the Bank had granted unused lines of credit to borrowers aggregating approximately $31,468 and $11,711 for commercial lines and open-end consumer lines, respectively.

F-40

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Note 17:   Derivatives

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.  The Bank had $2.9 million and $2.5 million in total notional amount of interest rate lock commitments with a fair value of $(1) and $21 at December 31, 2011 and December 31, 2010, respectively.  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.  The Bank had $8.4 million and $5.5 million in total notional amount related to these forward sale commitments with a fair value of ($2) and $21 at December 31, 2011 and December 31, 2010, respectively.  Changes in fair value are recorded in other assets or other liabilities on the consolidated 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 was $0 for December 31, 2011 and December 31, 2010, respectively.

Note 18:   Parent Company Condensed Financial Statements

The condensed year-end 2011 and 2010 financial statements, pertaining only to First Advantage Bancorp, are as follows:

	December 31,
Balance Sheet	2011		2010
	(Dollars in thousands)
Assets
Cash and cash equivalents	$	9,929	$	13,053
Investment in subsidiaries		53,210		50,142
ESOP trust loan receivable		3,162		3,362
Income tax receivable		13		26
Prepaid and other assets		200		200
Total Assets	$	66,514	$	66,783
Liabilities and Stockholders’ Equity
Other liabilities	$	39	$	56
Stockholders’ equity		66,475		66,727
Total Liabilities and Stockholder’s Equity	$	66,514	$	66,783

Condensed Statement of Income	December 31, 2011		December 31, 2010
	(Dollars in thousands)
Income
ESOP loan interest	$	252	$	266
Interest on reverse repurchase agreement		20		39
Total income		272		305
Operating expenses		345		350
Loss before equity in undistributed net income of  subsidiaries		(73)		(45)
Equity in undistributed net income of subsidiaries		1,973		1,741
Net income	$	1,900	$	1,696

F-41

First Advantage Bancorp

Notes to Consolidated Financial Statements

Years Ended December 31, 2011 and 2010

(Dollars in thousands, except per share amounts)

Statement of Cash Flows	December 31, 2011		December 31, 2010
	(Dollars in thousands)
Operating Activities
Net income	$	1,900	$	1,696
Items not requiring (providing) cash
Equity in undistributed net income of subsidiaries		(1,973)		(1,741)
Change in other assets		13		34
Change in other liabilities		12		7
Net cash used in operating activities		(48)		(4)
Investing Activities
Proceeds from repayment of ESOP loan from subsidary		200		191
Net cash provided in investing activities		200		191
Financing Activities
Stock purchased/retired - repurchase program		(2,923)		(5,782)
Cash received upon exercise of employee stock options		570		-
Cash paid for dividends		(923)		(983)
Net cash used in financing activities		(3,276)		(6,765)
Decrease in cash and cash equivalents		(3,124)		(6,578)
Cash and cash equivalents, beginning of year		13,053		19,631
Cash and cash equivalents, end of year	$	9,929	$	13,053

Note 19:   Quarterly Financial Information

The quarterly financial statements presented below reflect all adjustments which are, in the opinion of management, necessary to fairly present results of operations for the interim periods indicated:

Unaudited	Three Months Ended
2011	March 31		June 30		September 30		December 31
	(Dollars in thousands)
Interest and dividend income	$	4,370	$	4,437	$	4,350	$	4,498
Interest expense		1,029		997		970		907
Net interest income		3,341		3,440		3,380		3,591
Provision for loan losses		255		233		235		244
Net interest income after provision for loan losses		3,086		3,207		3,145		3,347
Non-interest income		579		683		642		618
Non-interest expense		3,117		3,066		2,928		3,175
Income before provision for income taxes		548		824		859		790
Provision for income taxes		190		338		333		260
Net income	$	358	$	486	$	526	$	530
	Three Months Ended
2010	March 31		June 30		September 30		December 31
	(Dollars in thousands)
Interest and dividend income	$	4,365	$	4,409	$	4,382	$	4,415
Interest expense		1,357		1,284		1,211		1,147
Net interest income		3,008		3,125		3,171		3,268
Provision for loan losses		227		232		248		627
Net interest income after provision for loan losses		2,781		2,893		2,923		2,641
Non-interest income		604		767		697		670
Non-interest expense		2,882		2,921		2,873		2,636
Income before provision for income taxes		503		739		747		675
Provision for income taxes		176		408		275		109
Net income	$	327	$	331	$	472	$	566

F-42

EX-21.1

Exhibit 21.1

Subsidiaries

Registrant	Percentage Ownership	Jurisdiction or State of Incorporation
First Advantage Bancorp		Tennessee
Subsidiaries
First Advantage Bank	100%	Tennessee
First Financial Mortgage Corp. (1)	100%	Tennessee

____________________

(1)       Wholly owned subsidiary of First Advantage Bank.

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-147732, Form S-8 No. 333-151679) of First Advantage Bancorp of our report dated March 8, 2012, relating to our audit of the consolidated financial statements, which appear in this Annual Report on Form 10-K of First Advantage Bancorp for the year ended December 31, 2011.

Memphis, Tennessee

March 8, 2012

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Earl O. Bradley, III, certify that:

1. I have reviewed this Annual Report on Form 10-K of First Advantage Bancorp:

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and in preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as the end of the period covered by this annual report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of  internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 8, 2012	/s/Earl O. Bradley, III
	Earl O. Bradley, III
	Chief Executive Officer
	(principal executive officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Bonita H. Spiegl, certify that:

1. I have reviewed this Annual Report on Form 10-K of First Advantage Bancorp:

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and in preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as the end of the period covered by this annual report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of  internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 8, 2012	/s/Bonita H. Spiegl
	Bonita H. Spiegl
	Chief Financial Officer and Secretary (principal financial and accounting officer)

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADDED BY

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of First Advantage Bancorp (the “Company”) on Form 10-K for the year ended December 31, 2011 as filed with the Securities and Exchange Commission (the “Report”), the undersigned hereby certify, pursuant to 18 U.S.C. §1350, as added by § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

March 8, 2012	/s/Earl O. Bradley, III
	Earl O. Bradley, III
	Chief Executive Officer
	/s/Bonita H. Spiegl
	Bonita H. Spiegl
	Chief Financial Officer and Secretary

XML

Parent Company Condensed Financial Statements

12 Months Ended

Dec. 31, 2011

Parent Company Condensed Financial Statements [Abstract]

Parent Company Condensed Financial Statements

Note 18:   Parent Company Condensed Financial Statements

The condensed year-end 2011 and 2010 financial statements, pertaining only to First Advantage Bancorp, are as follows:

	December 31,
Balance Sheet	2011		2010
	(Dollars in thousands)
Assets
Cash and cash equivalents	$	9,929	$	13,053
Investment in subsidiaries		53,210		50,142
ESOP trust loan receivable		3,162		3,362
Income tax receivable		13		26
Prepaid and other assets		200		200
Total Assets	$	66,514	$	66,783
Liabilities and Stockholders' Equity
Other liabilities	$	39	$	56
Stockholders' equity		66,475		66,727
Total Liabilities and Stockholder's Equity	$	66,514	$	66,783

Condensed Statement of Income	December 31, 2011		December 31, 2010
	(Dollars in thousands)
Income
ESOP loan interest	$	252	$	266
Interest on reverse repurchase agreement		20		39
Total income		272		305
Operating expenses		345		350
Loss before equity in undistributed net income of  subsidiaries		(73)		(45)
Equity in undistributed net income of subsidiaries		1,973		1,741
Net income	$	1,900	$	1,696

Statement of Cash Flows	December 31, 2011		December 31, 2010
	(Dollars in thousands)
Operating Activities
Net income	$	1,900	$	1,696
Items not requiring (providing) cash
Equity in undistributed net income of subsidiaries		(1,973)		(1,741)
Change in other assets		13		34
Change in other liabilities		12		7
Net cash used in operating activities		(48)		(4)
Investing Activities
Proceeds from repayment of ESOP loan from subsidary		200		191
Net cash provided in investing activities		200		191
Financing Activities
Stock purchased/retired - repurchase program		(2,923)		(5,782)
Cash received upon exercise of employee stock options		570		-
Cash paid for dividends		(923)		(983)
Net cash used in financing activities		(3,276)		(6,765)
Decrease in cash and cash equivalents		(3,124)		(6,578)
Cash and cash equivalents, beginning of year		13,053		19,631
Cash and cash equivalents, end of year	$	9,929	$	13,053

XML

Earnings Per Common Share

12 Months Ended

Dec. 31, 2011

Earnings Per Common Share [Abstract]

Earnings Per Common Share

Note 2:   Earnings Per Common Share

The following table presents the calculation of basic and diluted earnings per common share.

	Year Ended December 31,
	2011		2010
Net income	$	1,900	$	1,696
Weighted-average shares - Basic EPS		4,075,562		4,259,064
Weighted-average restricted shares -
2007 Deferred Compensation Plan		-		6,909
2008 Equity Incentive Plan		178,320		-
Weighted-average shares -
ESOP committed to be released - diluted EPS		98,899		29,120
Weighted-average shares - Diluted EPS		4,352,781		4,295,093
Basic earnings per common share	$	0.47	$	0.40
Diluted earnings per common share	$	0.44	$	0.39

XML

Nature of Operations and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2011

Nature of Operations and Summary of Significant Accounting Policies [Abstract]

Nature of Operations and Summary of Significant Accounting Policies

Note 1:   Nature of Operations and Summary of Significant Accounting Policies

Conversion to Tennessee-chartered Commercial Bank and Name Change

On November 2, 2011, the Board of Directors of First Federal Savings Bank approved a change of the Bank's name to First Advantage Bank in anticipation of the Bank's conversion from a federally-chartered savings bank to a Tennessee-chartered commercial bank (the “Charter Conversion”).  At close of business on February 2, 2012, the Bank completed the Charter Conversion.  On that same date, the Company became a holding company regulated by the Board of Governors of the Federal Reserve System.  As a result of the charter conversion, the Bank is now regulated by the Tennessee Department of Financial Institutions (the “TDFI”) and the Federal Deposit Insurance Corporation (the “FDIC”).  The Bank's deposits continue to be insured by the FDIC.  The charter conversion is not expected to have any significant financial impact or affect the Company's and the Bank's current activities.

Nature of Operations

First Advantage Bancorp is a holding company whose principal activity is the ownership and management of its wholly owned subsidiary, First Advantage Bank. The Bank has one inactive wholly owned subsidiary, First Financial Mortgage Corp.  The Bank is primarily engaged in providing a full range of banking and financial services to individual and corporate customers in Clarksville, Tennessee and surrounding areas.  The Bank is subject to the regulation of certain federal agencies and undergoes periodic examinations by those regulatory authorities.

Basis of Presentation

The accounting and financial reporting policies the Company follows conform, in all material respects, to accounting principles generally accepted in the United States of America. Certain items in prior period financial statements have been reclassified to conform to the current presentation.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and the Bank and its wholly owned subsidiary First Financial Mortgage Corporation (collectively referred to as the “Company”).  All significant inter-company accounts and transactions have been eliminated in consolidation.  First Financial Mortgage Corporation is an inactive subsidiary and, therefore, its operations are not material to the consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less, when purchased, to be cash equivalents.

     Other Investments

Other investments consist of non-negotiable time deposits placed with other financial institutions and have maturities ranging from six to twelve months, when purchased.  These investments were directly placed by the Company and are not considered brokered deposits and are fully insured by the Federal Deposit Insurance Corporation.

Securities

Available-for-sale securities, which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value.  Unrealized gains and losses are recorded, net of related income tax effects, in other comprehensive income. The Company does not hold any held-to-maturity securities, which would include any security for which the Company has the positive intent and ability to hold until maturity.  The Company does not hold any trading securities, which would include any security held for resale in anticipation of short-term market movements. Management determines the appropriate classification of securities at the time of purchase.

Interest income includes amortization of purchase premiums and discounts.  Realized gains and losses are derived from the amortized cost of the security sold.  Declines in fair value of available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses.  In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Loans Held for Sale

Mortgage loans held for sale originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate.  Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.  Gains and losses are realized at the time consideration is received and all other criteria for sales treatment have been met.

Loans

Loans that management has the intent and ability to hold for the foreseeable future, or until maturityorpayoffs, are reported at their outstanding unpaid principal balances and adjusted for any charge-offs, the allowance for loan losses, any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.  Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term.

Generally, the accrual of interest on loans is discontinued when, in management's opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions.  When interest accrual is discontinued, all unpaid accrued interest is reversed.  Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due.  Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Prior to 2004, the Bank sold mortgage loans to the Government National Mortgage Association (GNMA) in the normal course of business and retained the servicing rights. The GNMA programs under which the loans were sold allowed us to repurchase individual delinquent loans that meet certain criteria from the securitized loan pool. At the Bank's option, and without GNMA's prior authorization, the Bank may repurchase a delinquent loan for an amount equal to 100% of the remaining principal balance on the loan. Once the Bank has the unconditional ability to repurchase a delinquent loan, the Bank is deemed to have regained effective control over the loan and the Bank is required to recognize the loan on the balance sheet and record an offsetting liability, regardless of the intent to repurchase the loan. At December 31, 2011 residential real estate portfolio loans included $109 of loans available for repurchase under the GNMA optional repurchase programs with the offsetting liability recorded within other short-term borrowings.

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets.  The unpaid principal balances of mortgage loans serviced for others, with mortgage servicing rights fully amortized, were $14,772 and $20,879 at December 31, 2011 and December 31, 2010, respectively.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have been incurred through a provision for loan losses charged to income.  Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and represents management's best estimate of probable losses inherent in the loan portfolio.  An allowance is established for loans that are not currently considered impaired in order to recognize the inherent losses associated with lending activities. This historical valuation allowance is determined through two steps. First, an estimate of potential losses on the portfolio is created by analyzing historical losses for each loan category. Historical losses are calculated using both internal and peer group loss information. Internal loss history is calculated using the average of five years of actual losses. This is combined with the peer group loss data to create a range from which the Company selects a reserve amount for each portfolio based upon management's professional judgment and experience within the particular segment. Second, additional significant factors that, in management's judgment, affect the collectibility of the portfolio as of the evaluation date are considered. These significant factors may include changes in lending policies and procedures; international, national, regional and local economic conditions; changes in the nature and volume of the portfolio; changes in the experience, ability and depth of lending management; changes in the volume of past dues, non-accruals and classified assets; changes in the quality of the loan review system; changes in the value of underlying collateral for collateral dependent loans; concentrations of credit, and other factors. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement.  Accrual of interest and subsequent cash receipts on impaired loans are generally recorded in the same manner as nonaccrual loans. No interest income was recognized on non-accrual or impaired loans on a cash basis during 2011 or 2010. Loans are charged-off when the loss is confirmed.  Factors considered by management in determining impairment include payment status, collateral value, overall industry trends, customer management experience, balance sheet ratios, guarantor credit scores and the probability of collecting scheduled principal and interest payments when due. Loans are considered for impairment when they reach “substandard” or “doubtful” classification (see further discussion of these classifications in Note 5) or when management becomes aware of conditions existing at the balance sheet date that would make it probable that a loss has been incurred. Loans that experience insignificant payment delays and payment shortfalls are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price or the fair value of the collateral if the loan is collateral dependent.

The Company only evaluates non-homogenous loans for potential impairment. The non-homogenous loan types are the construction and commercial portfolio segments. Large groups of smaller balance homogenous loans are not evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment measurements.

Specific risk characteristics relevant to each portfolio segment are as follows:

One-to-four family loans - A portion of the one-to-four family loans have adjustable-rates. While we anticipate that adjustable-rate loans will better offset the adverse effects of an increase in interest rates as compared to fixed-rate mortgages, an increased monthly mortgage payment required of adjustable-rate loan borrowers in a rising interest rate environment could cause an increase in delinquencies and defaults. The marketability of the underlying property also may be adversely affected in a high interest rate environment. In addition, although adjustable-rate mortgage loans make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits.

Multi-family and nonresidential real estate loans - Loans secured by multi-family and nonresidential real estate generally have larger balances and involve a greater degree of risk than one-to-four family residential mortgage loans. Of primary concern in multi-family and nonresidential real estate lending is the borrower's creditworthiness and the feasibility and cash flow potential of the project. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject, to a greater extent than residential real estate loans, to adverse conditions in the real estate market or the economy. To monitor cash flows on income properties, we require borrowers and loan guarantors, if any, to provide annual financial statements on multi-family and nonresidential real estate loans. In reaching a decision on whether to make a multi-family or nonresidential real estate loan, we consider and review a global cash flow analysis of the borrower and consider the net operating income of the property, the borrower's expertise, credit history and profitability, and the value of the underlying property. An environmental survey or environmental risk insurance is obtained when the possibility exists that hazardous materials may have existed on the site, or the site may have been impacted by adjoining properties that handled hazardous materials.

Construction and Land loans - Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property's value at completion of construction and the estimated cost of construction. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, we may be required to advance funds beyond the amount originally committed to permit completion of the building. If the estimate of value proves to be inaccurate, we may be confronted, at or before the maturity of the loan, with a building having a value which is insufficient to assure full repayment if liquidation is required. If we are forced to foreclose on a building before or at completion due to a default, there can be no assurance that we will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs. In addition, speculative construction loans, which are loans made to home builders who, at the time of loan origination, have not yet secured an end buyer for the home under construction, typically carry higher risks than those associated with traditional construction loans. These increased risks arise because of the risk that there will be inadequate demand to ensure the sale of the property within an acceptable time. As a result, in addition to the risks associated with traditional construction loans, speculative construction loans carry the added risk that the builder will have to pay the property taxes and other carrying costs of the property until an end buyer is found. Land loans have substantially similar risks to speculative construction loans.

Consumer loans - Consumer loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are secured by assets that depreciate rapidly, such as motor vehicles. In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower. Consumer loan collections depend on the borrower's continuing financial stability and, therefore, are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

Commercial loans - Unlike residential mortgage loans, which generally are made on the basis of the borrower's ability to make repayment from his or her employment income or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial business loans are of higher risk and typically are made on the basis of the borrower's ability to make repayment from the cash flow of the borrower's business. As a result, the availability of funds for the repayment of commercial business loans may depend substantially on the success of the business itself. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

Monitoring

The Company monitors the credit quality of its loan portfolio on an ongoing basis. The responsibility to monitor credit quality of the loan portfolio begins with the Company's board of directors. This is accomplished by the following as it relates specifically to the loan portfolio's credit quality: review and approve a quarterly schedule of reports on portfolio composition and credit quality provided by management, review charge-offs as proposed by management, review and approve reports from the loan review function, and review and approve the adequacy of the Company's allowance for loan losses and related provision.

The board of directors also created an Asset Quality Review Committee (“AQRC”) comprised of appropriate and qualified management personnel from executive management including the Chief Executive Officer, President, Chief Lending Officer, Chief Credit Officer, Chief Financial Officer and the Credit Administration Manager. This management committee was created with the purpose of managing the quality of the loan portfolio of the Company and keeps the board of directors informed of any changes in risk levels. The AQRC monitors standard indicators of risk such as past dues, credit extensions, policy exceptions, concentrations of industry and loan types, concentrations to individual borrowers and other relevant statistical measures of asset quality. The AQRC is also responsible for recommending and approving loan risk rating changes. The AQRC approves all charge-offs as recommended by the Chief Credit Officer and reports these to the board of directors. Each quarter the committee reviews, with the assistance of loan officers, in order to understand and approve the proposed action plans and the projection of the future balance of assets adversely classified. The results and action plans along with the projected balances are reported to the board of directors

The board of directors also has established, for purposes of monitoring credit quality of the loan portfolio, a credit administration function which is headed by the Chief Credit Officer (“CCO”). The CCO is the custodian of the Company's credit quality and is the chairperson of the AQRC. The CCO is responsible for portfolio monitoring and reporting which includes: policy compliance, approval and tracking of policy exceptions, portfolio composition, concentrations, asset quality ratings, criticized loans, delinquencies, nonaccruals and charge-offs.  The CCO also determines the adequacy of the allowance for loan losses and leads problem loan resolution.

The final item that the board of directors initiated in regards to monitoring credit quality of the loan portfolio is to hire an independent loan review function (“Loan Review”). The purpose of Loan Review is to conduct periodic loan reviews and an annual review of loan policies and procedures, and report any findings to the audit committee of the board of directors.  Annually, Loan Review prepares and presents to the AQRC the Loan Review Plan to define the scope of the review to independently assure the following: timely and accurate assignment of asset quality ratings, compliance with the Company's loan policies and procedures, accuracy of portfolio information and credit statistics provided to the Board, adequacy of the allowance for loan losses, documentation and enforceability of borrower obligations and the Company's interest in underlying collateral.

Derivatives

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 lock commitments, which are recorded at 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.  See Note 17 for additional information related to interest rate lock and forward sale commitments.

Premises and Equipment

Land is carried at cost.  Building and improvements, and furniture and equipment are carried at cost, less accumulated depreciation. Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets.

Federal Home Loan Bank Stock

Federal Home Loan Bank (“FHLB”) stock is a required investment for institutions that are members of the FHLB system.  The required investment in the common stock is based on a predetermined formula.  The Bank reports its investment in the FHLB stock at cost.

Other Real Estate Owned and Repossessed Assets

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

Securities Sold Under Agreements to Repurchase

The Company sells certain securities under agreements to repurchase.  The agreements are treated as collateralized financing transactions and the obligations to repurchase securities sold are reflected as a liability in the accompanying consolidated balance sheets.  The dollar amount of the securities underlying the agreements remains in the asset accounts.

Advertising and Marketing Expenses

Advertising and marketing costs are expensed as incurred.

Income Taxes

Income tax expense is the total of the current year's income tax due or refundable and the change in deferred tax assets and liabilities (excluding components of other comprehensive income).  Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates.  A valuation allowance, if needed, reduces deferred tax assets to the expected amount most likely to be realized.  Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income and recoverable taxes paid in prior years.  Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized.  The Company and its subsidiaries filed consolidated income tax returns for 2011.

Rabbi Trust

The Company established a rabbi trust to fund its Nonqualified Deferred Compensation Plan. The Company accounts for these plans in accordance with FASB's ASC 718 “Share-Based Payment.” Until the plan benefits are paid, creditors may make claims against the assets if the Company becomes insolvent.  See Note 14 for additional information.

Stock-Based Compensation

The Company accounts for its stock-based compensation plans in accordance with FASB's ASC 718 “Share-Based Payment.”  Compensation expense for stock options, non-vested stock awards and restricted stock is based on the fair value of the award on the measurement date, which, for the Company, is the date of the grant and is recognized ratably over the service period of the award.  The fair value of stock options granted is estimated using the Black-Scholes option-pricing model.  The fair value of non-vested stock awards and restricted stock is generally the market price of the Company's stock.  Forfeited and expired options and forfeited shares of restricted stock become available for future grants.  See Note 14 for additional information.

Comprehensive Income

Comprehensive income includes all changes in shareholders' equity during a period, except those resulting from transactions with shareholders.  Besides net income, other components of the Company's comprehensive income include after tax effect of changes in the net unrealized gain/loss on securities available for sale.

Bank Owned Life Insurance

The Company has purchased single-premium life insurance policies on certain former directors of the Company.  The net cash surrender value of those polices is classified in other assets.  Changes in the value of the insurance policies are classified in non-interest income.

Transfers of Financial Assets

Transfers of financial assets (which includes loan participations) are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Fair Value Measurements

FASB's ASC Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  In general, fair values of financial instruments are based upon quoted market prices, where available.  If such quoted market prices are not available, fair value is primarily determined by matrix pricing, and in some cases, fair value is determined by an independent third party.  Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.  These adjustments may include amounts to reflect counterparty credit quality as well as unobservable parameters.  Any such valuation adjustments are applied consistently over time.

Earnings Per Common Share

Basic earnings per share (“EPS”) is calculated by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted EPS is computed in a manner similar to that of basic EPS except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares (computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents (such as stock options and unvested restricted stock) were vested during the period. The weighted average  common shares outstanding equals the gross number of common shares issued less unallocated shares held by the  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.

Recently Issued Accounting Standards

ASU No. 2011-03, “Transfers and Servicing (Topic 860) - Reconsideration of Effective Control for Repurchase Agreements.” ASU 2011-03 is intended to improve financial reporting of repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. ASU 2011-03 removes from the assessment of effective control (i) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (ii) the collateral maintenance guidance related to that criterion. ASU 2011-03 will be effective for the Corporation on January 1, 2012 and is not expected to have a significant impact on the Company's consolidated financial position, results of operation, cash flows, or disclosures.

ASU 2011-04, “Fair Value Measurement (Topic 820) - Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs.” ASU 2011-04 amends Topic 820, “Fair Value Measurements and Disclosures,” to converge the fair value measurement guidance in U.S. generally accepted accounting principles and International Financial Reporting Standards. ASU 2011-04 clarifies the application of existing fair value measurement requirements, changes certain principles in Topic 820 and requires additional fair value disclosures. ASU 2011-04 is effective for annual periods beginning after December 15, 2011, and is not expected to have a significant impact on the Company's consolidated financial position, results of operation, cash flows, or disclosures.

ASU 2011-05, “Comprehensive Income (Topic 220) - Presentation of Comprehensive Income.” ASU 2011-05 amends Topic 220, “Comprehensive Income,” to require that all non-owner changes in stockholders' equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, ASU 2011-05 requires entities to present, on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement or statements where the components of net income and the components of other comprehensive income are presented. The option to present components of other comprehensive income as part of the statement of changes in stockholders' equity was eliminated. ASU 2011-05 is effective for annual and interim periods beginning after December 15, 2011; however, certain provisions related to the presentation of reclassification adjustments have been deferred by ASU 2011-12 “Comprehensive Income (Topic 220) - Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” as further discussed below. ASU 2011-05 is not expected to have a significant impact on the Company's consolidated financial position, results of operation, cash flows, or disclosures.

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

ASU 2011-12 “Comprehensive Income (Topic 220) - Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” ASU 2011-12 defers changes in ASU No. 2011-05 that relate to the presentation of reclassification adjustments to allow the FASB time to redeliberate whether to require presentation of such adjustments on the face of the financial statements to show the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income. ASU 2011-12 allows entities to continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before ASU No. 2011-05. All other requirements in ASU No. 2011-05 are not affected by ASU No. 2011-12. ASU 2011-12 is effective for annual and interim periods beginning after December 15, 2011 and is not expected to have a significant impact on the Company's consolidated financial position, results of operation, cash flows, or disclosures.

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Assets
Cash and due from banks	$ 7,651	$ 4,151
Interest-bearing demand deposits with banks	1,680	1,387
Federal funds sold	1,425	2,250
Cash and cash equivalents	10,756	7,788
Available-for-sale securities, at fair value	70,279	74,214
Other investments	0	3,486
Loans held for sale	5,509	3,155
Loans, net of allowance for loan losses of $4,316 and $3,649 at December 31, 2011 and 2010, respectively	259,534	238,346
Premises and equipment, net	7,504	7,553
Other real estate owned and repossessed assets	1,923	663
Federal Home Loan Bank stock	2,988	2,988
Accrued interest receivable	1,571	1,420
Income taxes receivable	2,789	1,515
Deferred tax asset	1,927	2,199
Other assets	1,369	1,925
Total assets	366,149	345,252
Deposits
Demand	28,062	19,681
Savings, checking and money market	134,360	120,859
Time certificates	70,162	78,964
Total deposits	232,584	219,504
Short-term borrowings	14,676	6,215
Federal Home Loan Bank advances	13,000	13,000
Long-term debt	35,000	35,000
Other liabilities	4,414	4,806
Total liabilities	299,674	278,525
Commitments and contingencies
Shareholders' Equity
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding at December 31, 2011 or 2010	0	0
Common stock, $0.01 par value, 50,000,000 shares authorized, 4,459,135 shares issued and 4,038,260 outstanding at December 31, 2011; 4,632,494 issued and 4,107,818 outstanding at December 31, 2010	45	46
Additional paid-in-capital	44,579	46,626
Common stock held by:
Nonqualified Deferred Compensation Plan	(1,845)	(1,810)
Employee Stock Ownership Plan	(2,860)	(3,198)
2008 Equity Incentive Plan	(1,107)	(1,434)
Retained earnings	24,900	23,923
Accumulated other comprehensive income	2,763	2,574
Total shareholders' equity	66,475	66,727
Total liabilities and shareholders' equity	$ 366,149	$ 345,252

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Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Consolidated Statements of Changes in Stockholders' Equity [Abstract]
Dividends paid (in dollars per share)	$ 0.20	$ 0.20

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Disclosures About Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2011

Disclosures About Fair Value of Financial Instruments [Abstract]

Disclosures About Fair Value of Financial Instruments

Note 15:   Disclosures About Fair Value of Financial Instruments

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

Available-for-Sale Securities

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

Fair Value of Assets Measured on a Recurring Basis

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

December 31, 2011	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Available for sale securities:
U.S. Treasury	$	6,075	$	6,075	$	-	$	-
U.S. Government agencies		8,022		-		8,022		-
Mortgage-backed securities		42,896		-		42,896		-
Collateralized mortgage obligations		2,490		-		2,490		-
State and political subdivisions		10,619		-		10,619		-
Corporate debt securities		177		-		-		177

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

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

Activity in assets measured using Level 3 inputs during the year was as follows:
Balance, January 1, 2010	$	30
Other-than-temporary impairment charges included in non-interest income		(12)
Payments and settlements		39
Balance, December 31, 2010	$	57

Fair Value of Assets Measured on a Nonrecurring Basis

Certain assets may be recorded at fair value on a nonrecurring basis.  These nonrecurring fair value adjustments typically result from the application of lower of cost or market accounting or a write-down occurring during the period.  The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value of the related individual assets as of December 31, 2011.  There were no nonrecurring fair value adjustments for the period ending December 31, 2010.

December 31, 2011	Level 1	Level 2	Level 3		Nonrecurring Fair Value Adjustments  Twelve Months Ended December 31, 2011
Impaired loans			$	1,513	$	(561)
Other real estate owned				1,391		( 38)

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

Mortgage Loans Held For Sale

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

Other Assets Held for Sale

Other assets held for sale represents real estate that is not intended for use in operations and recorded at lower of cost or estimated fair value on a nonrecurring basis. Fair value is based upon independent market prices, appraised values or management's estimation of the value. When the fair value is based on an observable market price or current appraised value, the Company classifies the asset as Level 2.  They are recorded at cost in the consolidated balance sheets at December 31, 2011 and 2010

Other Real Estate Owned and Repossessed Assets

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

Impaired Loans

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

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

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

	At December 31,
	2011						2010
	Carrying Amount			Fair Value			Carrying Amount		Fair Value
Financial assets
Cash and cash equivalents	$	10,756		$	10,756		$	7,788	$	7,788
Other investments		-			-			3,486		3,486
Available-for-sale securities		70,279			70,279			74,214		74,214
Loans held for sale		5,509			5,509			3,155		3,155
Loans, net of allowance for loan losses		259,534			262,715			238,346		237,770
FHLB stock		2,988			2,988			2,988		2,988
Forward sale commitments		(2	)		(2	)		21		21
Financial liabilities
Deposits	$	232,584		$	232,841		$	219,504	$	219,808
Securities sold under agreement to repurchase		4,176			4,176			6,215		6,215
FHLB advances		23,500			24,329			13,000		13,790
Long term debt		35,000			37,478			35,000		37,455
Interest rate lock commitments		(1	)		(1	)		21		21

General

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

Cash and Cash Equivalents and Interest Receivable

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

Federal Home Loan Bank Stock

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

Other Investments

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

Available-for-Sale Securities

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

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

Deposits

Deposits include non-interest bearing checking accounts and interest bearing deposits, including savings accounts, checking accounts and money market deposits.  The carrying amount for these 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.

Federal Home Loan Bank Advances and Other Long-term Debt

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

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.

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Derivatives

12 Months Ended

Dec. 31, 2011

Derivatives [Abstract]

Derivatives

Note 17:   Derivatives

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.  The Bank had $2.9 million and $2.5 million in total notional amount of interest rate lock commitments with a fair value of $(1) and $21 at December 31, 2011 and December 31, 2010, respectively.  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.  The Bank had $8.4 million and $5.5 million in total notional amount related to these forward sale commitments with a fair value of ($2) and $21 at December 31, 2011 and December 31, 2010, respectively.  Changes in fair value are recorded in other assets or other liabilities on the consolidated 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 was $0 for December 31, 2011 and December 31, 2010, respectively.

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Operating Activities
Net income	$ 1,900	$ 1,696
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	967	1,334
Depreciation, amortization and accretion	817	804
Deferred income taxes	64	303
Funding of mortgage loans held for sale	(39,673)	(52,485)
Proceeds from sales of mortgage loans held for sale	38,292	52,800
Net gains on sales of mortgage loans held for sale	(973)	(1,205)
Net realized gain on available for sale securities	(25)	(104)
Net (gain) loss on disposal of premises and equipment	41	2
Net (gain) loss on sale of foreclosed assets	(10)	38
Stock-based compensation	842	1,077
Decrease in other assets	242	229
Decrease (increase) in other liabilities	(1,667)	3,090
Net cash provided by operating activities	817	7,579
Investing Activities
Purchases of other investments	0	(3,486)
Proceeds from maturities of other investments	3,486	0
Purchases of securities available for sale	(21,473)	(16,696)
Proceeds from call/maturities and repayments of securities available-for-sale	23,873	36,457
Proceeds from sales of securities available for sale	1,864	4,856
Net increase in loans	(23,434)	(29,285)
Purchase of premises and equipment	(570)	(251)
Proceeds from sale of other real estate owned	140	918
Net cash used in investing activities	(16,114)	(7,487)
Financing Activities
Net increase in demand deposits, money market, checking and savings accounts	21,882	11,408
Net decrease in time deposits	(8,802)	(8,144)
Decrease in repurchase agreements and other short-term borrowings	(2,039)	(668)
Proceeds from short-term borrowings	10,500	0
Cash paid for dividends	(923)	(983)
Stock repurchased/retired - repurchase program	(2,923)	(5,782)
Cash received upon exercise of employee stock options	570	0
Net cash provided (used in) by financing activities	18,265	(4,169)
Increase in Cash and Cash Equivalents	2,968	(4,077)
Cash and Cash Equivalents, Beginning of Period	7,788	11,865
Cash and Cash Equivalents, End of Period	10,756	7,788
Supplemental Cash Flow Information
Interest paid	3,963	5,141
Income taxes paid (net of refunds)	2,204	144
Other real estate owned acquired through foreclosure of real estate loans	$ 1,391	$ 115

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Assets
Loans, allowance for loan losses	$ 4,316	$ 3,649
Shareholders' Equity
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized (in shares)	10,000,000	10,000,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized (in shares)	50,000,000	50,000,000
Common stock, issued (in shares)	4,459,135	4,632,494
Common stock, outstanding (in shares)	4,038,260	4,107,818

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Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

Note 10:   Income Taxes

The Company files federal and Tennessee state income tax returns. The federal income tax returns for 2007 and later years, and the Tennessee income tax returns for 2008 and later years are still subject to federal, state, local, or non-US income tax examinations by tax authorities.

When income and expenses are recognized in different periods for tax purposes, applicable deferred taxes are provided in the consolidated financial statements.  If necessary, we recognize interest and penalties accrued relative to unrecognized tax benefits in their respective federal or state income tax accounts.  As of December 31, 2011, the Company did not have any liabilities recorded for uncertain tax positions.

Income tax expense consists of the following:

		Year Ended December 31,
		2011		2010
Current income taxes:
Federal	$	1,150	$	664
State		(93)		-
Deferred income taxes:
Federal		(236)		126
State		300		178
Income tax expense	$	1,121	$	968

A reconciliation of income tax expense at the statutory rate to the Bank's actual income tax expense is shown below:

	Year Ended December 31,
	2011					2010
	Dollars		%			Dollars		%
Computed at the statutory rate (34%)	$	1,027		34.00	%	$	906		34.00	%
Increase (decrease) resulting from:
State income taxes, net of federal effect		141		4.68			118		4.42
Tax-exempt interest income, net		(104)		(3.46)			(82)		(3.08)
Reduction of liability for uncertain tax positions		-		-			(68)		(2.55)
Other		57		1.88			94		3.53
Income tax expense	$	1,121		37.10	%	$	968		36.32	%

The tax effects of temporary differences related to deferred taxes shown on the balance sheets were:

	December 31,
	2011			2010
Deferred tax assets:
Allowance for loan losses	$	1,633		$	1,384
Deferred compensation		783			1,125
Net operating loss carryforward		-			213
Other-than-temporary impairment		1,874			1,874
Other		747			422
		5,037			5,018
Deferred tax liabilities:
FHLB dividends		(953	)		(953	)
Unrealized gains on available-for-sale securities		(1,805	)		(1,597	)
Depreciation		(352	)		(269	)
		(3,110	)		(2,819	)
Net deferred tax asset	$	1,927		$	2,199

No valuation allowance for deferred tax assets was recorded at December 31, 2011 and 2010 as management believes it is more likely than not that all of the deferred tax assets will be realized through either recoverable taxes paid in prior years or off-set of future earnings.

Retained earnings at December 31, 2011 and 2010 includes approximately $3,633 of which no provision for federal income taxes has been made.  This amount represents the tax bad debt reserve at December 31, 1987, defined as the base year reserve, which pursuant to the Tax Reform Act of 1986 was not required to be recaptured into taxable income.  If this portion of retained earnings is used in the future for any other purpose than to absorb bad debts, the amount used will be added to future taxable income. The deferred tax liability on the above amount at December 31, 2011 and 2010, if recorded, would be approximately $1,224.

As of December 31, 2010, the Company had state net operating loss carry-forward totaling $2,663 available to offset future taxable income and has been fully utilized.  On November 9, 2009, the Worker, Homeownership and Business Assistance Act was signed into law.  This act extended a five year net operating loss carryback that had previously been available to only small businesses.  The Company has filed the appropriate return with the Internal Revenue Service to carryback a federal 2008 net operating loss to 2005 resulting in the recognition of a current tax benefit of $2,290 in income taxes receivable.

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Document And Entity Information (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011
Entity Registrant Name	First Advantage Bancorp
Entity Central Index Key	0001404306
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float	$ 40.27
Entity Common Stock, Shares Outstanding	4,406,535
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2011

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Other Comprehensive Income

12 Months Ended

Dec. 31, 2011

Other Comprehensive Income [Abstract]

Other Comprehensive Income

Note 11:   Other Comprehensive Income

Total comprehensive income is reported in the accompanying statements of changes in shareholders' equity.  Information related to net other comprehensive income is as follows:

	December 31,
	2011			2010
Net income	$	1,900		$	1,696
Unrealized gains on available-for-sale securities		331			297
Less reclassification adjustment for realized gains included in income		(25	)		(104	)
Other comprehensive gains, before tax effect		306			193
Tax expense		117			74
Other comprehensive income		189			119
Comprehensive income	$	2,089		$	1,815

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Consolidated Statements of Income (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Interest and dividend income
Loans	$ 14,505	$ 13,641
Investment securities	2,905	3,659
Other	245	271
Total interest and dividend income	17,655	17,571
Interest expense
Deposits	2,137	3,192
Borrowings	1,766	1,807
Total interest expense	3,903	4,999
Net interest income	13,752	12,572
Provision for loan losses	967	1,334
Net interest income after provision for loan losses	12,785	11,238
Non-interest income
Service charges on deposit accounts and other fees	1,267	1,212
Net gains on sales of mortgage loans held for sale	973	1,205
Net realized gain on sales of available-for-sale securities	25	104
Insurance and brokerage commissions	121	132
Other	136	85
Total non-interest income	2,522	2,738
Non-interest expense
Salaries and employee benefits	6,292	6,146
Net occupancy expense	703	693
Equipment expense	722	726
Data processing fees	960	885
Professional fees	831	434
Marketing expense	563	245
Supplies and communication	341	282
Loan collection and repossession expense	38	173
Other	1,836	1,728
Total non-interest expense	12,286	11,312
Income before income taxes	3,021	2,664
Provision for income taxes	1,121	968
Net income	$ 1,900	$ 1,696
Per common share:
Basic net income per common share (in dollars per share)	$ 0.47	$ 0.40
Diluted net income per common share (in dollars per share)	$ 0.44	$ 0.39
Dividends declared per common share (in dollars per share)	$ 0.20	$ 0.20
Basic weighted average common shares outstanding (in shares)	4,075,562	4,259,064
Diluted weighted average common shares outstanding (in shares)	4,352,781	4,295,093

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Loans and Allowance for Loan Losses

12 Months Ended

Dec. 31, 2011

Loans and Allowance for Loan Losses [Abstract]

Loans and Allowance for Loan Losses

Note 5:   Loans and Allowance for Loan Losses

Loans as of December 31, 2011 and 2010 are summarized below:

	At December 31,
	2011						2010
	Amount			Percent			Amount			Percent
Real estate loans:
Permanent loans:
One-to-four family	$	44,813			17.0	%	$	43,695			18.1	%
Multi-family		16,695			6.3			13,592			5.6
Nonresidential		98,278			37.3			77,089			31.9
Construction loans:
One-to-four family		18,618			7.1			20,373			8.4
Multi-family		2,357			0.9			357			0.1
Nonresidential		6,753			2.5			5,929			2.5
Land loans		25,409			9.6			26,394			10.9
Total real estate loans		212,923			80.7			187,429			77.5
Consumer:
Home equity loans and lines of credit		19,722			7.5			18,761			7.7
Auto loans		429			0.2			639			0.3
Deposit loans		321			0.1			377			0.2
Overdrafts		77			-			47			-
Other		1,828			0.7			2,193			0.9
Total consumer loans		22,377			8.5			22,017			9.1
Commercial loans		28,462			10.8			32,460			13.4
Total loans		263,762			100.0	%		241,906			100.0	%
Allowance for loan losses		(4,316	)					(3,649	)
Net deferred loan costs		88						89
Loans receivable, net	$	259,534					$	238,346

As of December 31, 2011, we recorded approximately $2.2 million of commercial loans and $2.2 million of short term borrowings in other liabilities on our balance sheet as a result of “failed sale” accounting treatment, under applicable accounting guidance, for certain transfers of financial assets.

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

Allowance for Loan Losses and Recorded Investment in Loans
For the Year Ended December 31, 2011
	One-to-Four		Multi-family/						Consumer
	Family		Nonresidential		Construction		Land		and Other		Commercial		Total
Allowance for loan losses:
Beginning balance	$	545	$	1,061	$	325	$	730	$	250	$	738	$	3,649
Charge offs		(18)		(9)		(32)		-		(45)		(236)		(340)
Recoveries		-		-		-		-		8		32		40
Provision (Credit)		(51)		11		107		(116)		83		933		967
Ending balance	$	476	$	1,063	$	400	$	614	$	296	$	1,467	$	4,316
Ending balance individually   evaluated for impairment	$	50	$	-	$	-	$	-	$	117	$	394	$	561
Ending balance collectively   evaluated for impairment	$	426	$	1,063	$	400	$	614	$	179	$	1,073	$	3,755
Loans:
Ending balance	$	44,813	$	114,973	$	27,728	$	25,409	$	22,377	$	28,462	$	263,762
Ending balance individually   evaluated for impairment	$	655	$	237	$	-	$	-	$	204	$	820	$	1,916
Ending balance collectively   evaluated for impairment	$	44,158	$	114,736	$	27,728	$	25,409	$	22,173	$	27,642	$	261,846

Allowance for Loan Losses and Recorded Investment in Loans
For the Year Ended December 31, 2010
	One-to-Four		Multi-family/						Consumer
	Family		Nonresidential		Construction		Land		and Other		Commercial		Total
Allowance for loan losses:
Beginning balance	$	280	$	1,125	$	160	$	286	$	200	$	762	$	2,813
Charge offs		(311)		-		-		-		(124)		(91)		(526)
Recoveries		4		-		-		-		12		12		28
Provision (Credit)		572		(64)		165		444		162		55		1,334
Ending balance	$	545	$	1,061	$	325	$	730	$	250	$	738	$	3,649
Ending balance individually   evaluated for impairment	$	195	$	-	$	-	$	71	$	-	$	-	$	266
Ending balance collectively   evaluated for impairment	$	350	$	1,061	$	325	$	659	$	250	$	738	$	3,383
Loans:
Ending balance	$	43,695	$	90,681	$	26,659	$	26,394	$	22,017	$	32,460	$	241,906
Ending balance individually   evaluated for impairment	$	461	$	249	$	-	$	292	$	160	$	213	$	1,375
Ending balance collectively   evaluated for impairment	$	43,234	$	90,432	$	26,659	$	26,102	$	21,857	$	32,247	$	240,531

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

Credit Quality Indicators as of December 31, 2011
	One-to-Four		Multi-family/						Consumer
	Family		Nonresidential		Construction		Land		and Other		Commercial		Total
Corporate Credit Exposures
Credit Risk Profile by  Internally Assigned Grade
Grade:
Pass	$	41,534	$	111,213	$	26,403	$	25,195	$	21,971	$	27,353	$	253,669
Special mention		840		1,398		137		168		163		472		3,178
Substandard		2,439		2,362		1,188		46		243		426		6,704
Doubtful		-		-		-		-		-		211		211
Total	$	44,813	$	114,973	$	27,728	$	25,409	$	22,377	$	28,462	$	263,762

Credit Quality Indicators as of December 31, 2010
	One-to-Four		Multi-family/						Consumer
	Family		Nonresidential		Construction		Land		and Other		Commercial		Total
Corporate Credit Exposures
Credit Risk Profile by  Internally Assigned Grade
Grade:
Pass	$	41,389	$	87,570	$	25,413	$	25,864	$	21,637	$	31,703	$	233,576
Special mention		794		1,904		720		192		70		103		3,783
Substandard		1,512		1,207		526		338		310		442		4,335
Doubtful		-		-		-		-		-		212		212
Total	$	43,695	$	90,681	$	26,659	$	26,394	$	22,017	$	32,460	$	241,906

Credit risk by internally assigned grade

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

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

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

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

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

Credit risk by payment activity

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

The following table shows an aging analysis of past due loans as of December 31, 2011 and 2010:

Age Analysis of Past Due Loans
As of December 31, 2011
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans		Loans >90 Days and Accruing
One-to-four family	$	889	$	172	$	1,300	$	2,361	$	42,452	$	44,813	$	-
Multifamily/nonresidential		-		237		-		237		114,736		114,973		-
Construction		292		-		-		292		27,436		27,728		-
Land		-		-		-		-		25,409		25,409		-
Consumer and other		303		23		159		485		21,892		22,377		-
Commercial		269		189		385		843		27,619		28,462		-
Total		1,753		621		1,844		4,218		259,544		263,762		-

Age Analysis of Past Due Loans
As of December 31, 2010
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans		Loans >90 Days and Accruing
One-to-four family	$	675	$	168	$	693	$	1,536	$	42,159	$	43,695	$	-
Multifamily/nonresidential		-		-		-		-		90,681		90,681		-
Construction		-		-		-		-		26,659		26,659		-
Land		-		-		541		541		25,853		26,394		-
Consumer and other		661		137		436		1,234		20,783		22,017		-
Commercial		-		-		-		-		32,460		32,460		-
Totals		1,336		305		1,670		3,311		238,595		241,906		-

The following tables set forth details regarding impaired loans at December 31, 2011 and 2010:

Impaired Loans
For the Year Ended December 31, 2011
	Recorded Investment		Unpaid Principal Blance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
One-to-four family	$	-	$	-	$	-	$	-	$	-
Multifamily/nonresidential		237		237		-		237		-
Construction		-		-		-		-		-
Land		-		-		-		-		-
Consumer and other		-		-		-		-		-
Commercial		166		218		-		166		-
Subtotal		403		455		-		403		-
With an allowance recorded:
One-to-four family		655		655		50		659		28
Multifamily/nonresidential		-		-		-		-		-
Construction		-		-		-		-		-
Land		-		-		-		-		-
Consumer and other		203		203		117		204		7
Commercial		655		675		394		596		22
Subtotal		1,513		1,533		561		1,459		57
Total:
One-to-four family		655		655		50		659		28
Multifamily/nonresidential		237		237		-		237		-
Construction		-		-		-		-		-
Land		-		-		-		-		-
Consumer and other		203		203		117		204		7
Commercial		821		893		394		762		22
Total	$	1,916	$	1,988	$	561	$	1,862	$	57

Impaired Loans
For the Year Ended December 31, 2010
	Recorded Investment		Unpaid Principal Blance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
One-to-four family	$	-	$	-	$	-	$	-	$	-
Multifamily/nonresidential		249		249		-		252		5
Construction		-		-		-		-		-
Land		-		-		-		-		-
Consumer and other		160		160		-		160		6
Commercial		212		270		-		251		5
Subtotal		621		679		-		663		16
With an allowance recorded:
One-to-four family		461		461		195		465		23
Multifamily/nonresidential		-		-		-		-		-
Construction		-		-		-		-		-
Land		292		292		71		292		5
Consumer and other		-		-		-		-		-
Commercial		-		-		-		-		-
Subtotal		753		753		266		757		28
Total:
One-to-four family		461		461		195		465		23
Multifamily/nonresidential		249		249		-		252		5
Construction		-		-		-		-		-
Land		292		292		71		292		5
Consumer and other		160		160		-		160		6
Commercial		212		270		-		251		5
Total	$	1,374	$	1,432	$	266	$	1,420	$	44

No interest was recognized on impaired loans on a cash basis during the years ended December 31, 2011 and 2010.

The following table sets forth loans on nonaccrual status as of December 31, 2011 and 2010:

Nonaccrual Loans
	December 31,
	2011		2010
One-to-four family	$	2,135	$	1,266
Multifamily/nonresidential		-		541
Construction		-		-
Land		-		541
Consumer and other		254		240
Commercial		399		397
	$	2,788	$	2,985

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.  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 $68 in 2011 and $57 in 2010.

The following tables set forth information about modifications which were considered troubled debt restructurings (“TDRs”) as of December 31, 2011 and December 31, 2010.

Modifications
As of December 31, 2011
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings
One-to-four family		1	$	168	$	165
Consumer and Other		1	$	40	$	40
Commercial		2	$	237	$	231
Troubled Debt Restructurings That Subsequently Defaulted	Number of Contracts		Pre-Modification Outstanding Recorded Investment
Troubled debt restructurings
One-to-four family		1	$	168

Modifications
As of December 31, 2010
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings
Commercial		1	$	178	$	178
Troubled Debt Restructurings That Subsequently Defaulted	Number of Contracts		Pre-Modification Outstanding Recorded Investment
Troubled debt restructurings
Commercial		-	$	-

Loans characterized as TDRs totaled $436 at December 31, 2011, compared to $178 at December 31, 2010. The allowance allocated to TDRs, excluding specifically-impaired loans referred to above, totaled $0 at both December 31, 2011 and 2010. The TDR total at December 31, 2011 is comprised of four loans.  One is comprised of a single commercial real estate loan, which was identified as a TDR at December 31, 2011 and 2010, for which the Company agreed to accept interest only payments for one year and will be removed from TDR status during the first quarter of 2012, upon return to amortization status.  The remaining TDRs consist of one single family residential loan in the amount of $165, which was restructured, has subsequently failed to perform under the restructured terms, and has been referred to counsel for foreclosure, and two TDRs that consist of one consumer and one commercial which total $99 and are both paying as agreed under the restructured terms.

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Securities

12 Months Ended

Dec. 31, 2011

Securities [Abstract]

Securities

Note 4:   Securities

The amortized cost and approximate fair values of available-for-sale securities as of December 31, 2011 and 2010 are summarized below:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Approximate Fair Value
December 31, 2011
U.S. Treasury	$	4,692	$	1,383	$	-		$	6,075
U.S. Government agencies		8,000		22		-			8,022
Mortgage-backed securities		40,097		2,799		-			42,896
Collateralized mortgage obligations		2,611		-		(121)			2,490
State and political subdivisions		10,163		463		(7)			10,619
Corporate debt securities		2		175		-			177
Total	$	65,565	$	4,842	$	(128	)	$	70,279
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Approximate Fair Value
December 31, 2010
U.S. Treasury	$	4,730	$	1,363	$	-		$	6,093
U.S. Government agencies		7,999		38		(119)			7,918
Mortgage-backed securities		43,748		2,603		(2)			46,349
Collateralized mortgage obligations		3,993		87		-			4,080
State and political subdivisions		9,555		180		(18)			9,717
Corporate debt securities		18		39		-			57
Total	$	70,043	$	4,310	$	(139)		$	74,214

The mortgage-backed securities are backed by the Federal Home Loan Mortgage Corporation (“Freddie Mac”), Federal National Mortgage Association (“Fannie Mae”) and Government National Mortgage Association (“GNMA”).  None of the mortgage-backed securities are privately issued.

Collateralized mortgage obligations (“CMOs”) are mortgage derivatives and the CMOs owned by the Bank are classified as “low risk” under regulatory guidelines.  CMOs are subject to the effects of interest rate risk.  The Bank does not purchase CMOs at any significant premium over par value to limit certain prepayment risks.

The amortized cost and fair value of securities at December 31, 2011 and 2010, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	December 31, 2011				December 31, 2010
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Within one year	$	-	$	-	$	1,309	$	1,317
One to five years		5,698		7,183		297		309
Five to 10 years		2,608		2,811		8,822		10,291
After 10 years		17,162		17,389		15,867		15,948
		25,468		27,383		26,295		27,865
Mortgage-backed securities		40,097		42,896		43,748		46,349
Total	$	65,565	$	70,279	$	70,043	$	74,214

The carrying value of securities pledged as collateral to secure public deposits, borrowings and for other purposes, was $60,874 at December 31, 2011, and $68,995 at December 31, 2010.

Gross gains of $25 and $174 and gross losses of $-0- and $70 resulting from sales of securities were realized for the years ended December 31, 2011 and 2010, respectively.

Declines in fair value of available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses.  In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

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 of the Company's U.S. Government agencies, mortgage-backed securities, state and political subdivisions and collateralized mortgage obligation investments are temporary.

The Company continuously assesses individual securities as part of its ongoing portfolio management, including the identification of other-than-temporary declines in fair value.  The other-than-temporary assessment includes reviewing the extent and duration of declines in fair values of investments, the seniority and duration of the securities, historical and projected company financial performance, company-specific news and other developments, the outlook for industry sectors, credit ratings and macro-economic changes, including government policy initiatives.

As of December 31, 2011,  management does not have the intent to sell any of the securities classified as available for sale in the table below and believes that it is more likely than not that the Company will not have to sell any such securities before recovery of fair value.  The unrealized losses are largely due to increases in market interest rates over yields available at the time the underlying securities were purchased.  The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline.  Management does not believe any of the securities are impaired due to reasons of credit quality.  Accordingly, as of December 31, 2011, management believes the impairments detailed in the table below are temporary and no other-than-temporary impairment should be recorded in the Company's consolidated financial statements.

The following table shows the gross unrealized losses and fair value of securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2011 and 2010:

	December 31, 2011
	Less than 12 Months				12 Months or More				Total
Description of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Securities	Value		Losses		Value		Losses		Value		Losses
Collaterized mortgage obligations		2,490		(121)		-		-		2,490		(121)
State and political subdivisions		766		(7)		-		-		766		(7)
Total	$	3,256	$	(128)	$	-	$	-	$	3,256	$	(128)
	December 31, 2010
	Less than 12 Months				12 Months or More				Total
Description of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Securities	Value		Losses		Value		Losses		Value		Losses
U. S. Government agencies	$	6,881	$	(119)	$	-	$	-	$	6,881	$	(119)
Mortgage-backed securities		3,598		(2)		-		-		3,598		(2)
State and political subdivisions		1,252		(18)		-		-		1,252		(18)
Total	$	11,731	$	(139)	$	-	$	-	$	11,731	$	(139)

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Commitments and Credit Risk

12 Months Ended

Dec. 31, 2011

Commitments and Credit Risk [Abstract]

Commitments and Credit Risk

Note 16:   Commitments and Credit Risk

Commitments to Originate Loans

Commitments to originate loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments have fixed expiration dates or other termination clauses and may require payment of a fee.  Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  Each customer's creditworthiness is evaluated on a case-by-case basis.  The amount of collateral obtained, if deemed necessary, is based on management's credit evaluation of the counterparty.  Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

At December 31, 2011 and 2010, the Bank had outstanding commitments to originate loans aggregating $2,368 and $1,438, respectively.  The commitments extended over varying periods of time with the majority being disbursed within a one-year period.

Mortgage loans in the process of  origination represent amounts that the Bank plans to fund within a normal period of 60 to 90 days, and which are intended for sale to investors in the secondary market.  Total mortgage loans in the process of origination amounted to approximately $855 and $2,527, and mortgage loans held for sale amounted to $5,509 and $3,155 at December 31, 2011 and 2010, respectively.

The Bank had recourse commitments on loans sold on the secondary market of approximately $10,839 and $19,481 at December 31, 2011 and 2010, respectively.  Recourse provisions expire within one to six months from the date of transfer.

Standby Letters of Credit

Standby letters of credit are irrevocable conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.  Financial standby letters of credit are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions.  Performance standby letters of credit are issued to guarantee performance of certain customers under non-financial contractual obligations.  The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers.  Should the Bank be obligated to perform under the standby letters of credit, the Bank may seek recourse from the customer for reimbursement of amounts paid.

The Bank had total outstanding standby letters of credit amounting to $1,076 and $482 at December 31, 2011 and 2010, respectively, with terms generally ranging from 90 days to 13 months.

Lines of Credit

Lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Lines of credit have fixed expiration dates.  Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements.  Each customer's creditworthiness is evaluated on a case-by-case basis.  The amount of collateral obtained, if deemed necessary, is based on management's credit evaluation of the counterparty.  Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.  Management uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments.

At December 31, 2011, the Bank had granted unused lines of credit to borrowers aggregating approximately $31,083 and $11,311 for commercial lines and open-end consumer lines, respectively.  At December 31, 2010, the Bank had granted unused lines of credit to borrowers aggregating approximately $31,468 and $11,711 for commercial lines and open-end consumer lines, respectively.

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Regulatory Matters

12 Months Ended

Dec. 31, 2011

Regulatory Matters [Abstract]

Regulatory Matters

Note 12:   Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices.  The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

The Bank is subject to restrictions on the amount of dividends it may declare without the prior approval of the TDFI.  Under Tennessee law, the amount of dividends that may be paid in any year is limited to that year's net income, combined with the retained net income of the preceding two years.  As of January 1, 2012,  the Bank would have the ability to pay $2,055 in dividends to the Company, without regulatory approval.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum capital amounts and ratios (set forth in the table below).  Management believes, as of December 31, 2011 and 2010, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2011 and 2010, the most recent notification from the regulatory agencies categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.  To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the table.  There are no conditions or events since that notification that management believes have changed the Bank's category.

The Bank's actual capital amounts and ratios are presented in the table.

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2011
Total risk-based capital	$	53,238		19.03	%	$	22,386		8.00	%	$	27,983		10.00	%
(to risk-weighted assets)
Tier I capital		50,447		17.96			11,193		4.00			16,790		6.00
(to risk-weighted assets)
Tier I capital		50,447		13.88			14,534		4.00			18,167		5.00
(to adjusted total assets)
Tangible capital		50,447		13.88			5,450		1.50			N/A		N/A
(to adjusted tangible assets)
As of December 31, 2010
Total risk-based capital	$	50,243		19.24	%	$	20,890		8.00	%	$	26,112		10.00	%
(to risk-weighted assets)
Tier I capital		47,568		18.20			10,445		4.00			15,667		6.00
(to risk-weighted assets)
Tier I capital		47,568		13.89			13,701		4.00			17,127		5.00
(to adjusted total assets)
Tangible capital		47,568		13.89			5,138		1.50			N/A		N/A
(to adjusted tangible assets)

Below is a reconciliation of GAAP and regulatory capital amounts:

	December 31,
	2011		2010
Total equity per the Bank financial statements	$	53,210	$	50,142
Unrealized gains on available-for-sale securities   included in accumulated other comprehensive income		(2,763)		(2,574)
Tier 1 capital		50,447		47,568
Allowance for loan losses includable in Tier 2 capital		3,501		3,264
Equity investments and other assets required to be deducted		(710)		(589)
Total risk-based capital	$	53,238	$	50,243

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Deposits

12 Months Ended

Dec. 31, 2011

Deposit [Abstract]

Deposits

Note 8:   Deposits

Year-end deposits were as follows:

	December 31,
	2011		2010
Non-interest bearing demand deposits	$	28,062	$	19,681
Interest bearing deposits:
Savings		44,003		41,770
Checking		59,430		58,753
Money market		30,927		20,336
Certificates of deposit		70,162		78,964
Total interest bearing deposits		204,522		199,823
Total deposits	$	232,584	$	219,504

Presented below is a summary of interest expense by each significant category of deposits:

	December 31,
	2011		2010
NOW	$	378	$	595
Money market		261		245
Savings		349		463
Time deposits		1,149		1,889
Total interest expense	$	2,137	$	3,192

At December 31, 2011, the scheduled maturities of time deposit were as follows:

2012	$	47,886
2013		18,813
2014		1,795
2015		850
2016		815
2017 and thereafter		3
	$	70,162

Scheduled maturities of time deposits in amounts of $100,000 or more, at December 31, 2011, were as follows:

Due within three months or less	$	6,119
Due after three months and within six months		7,970
Due after six months and within twelve months		7,936
Due after twelve months		6,917
	$	28,942

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Premises and Equipment

12 Months Ended

Dec. 31, 2011

Premises and Equipment [Abstract]

Premises and Equipment

Note 6:   Premises and Equipment

Major classifications of premises and equipment, stated at cost, were as follows:

		December 31,
	Estimated Useful Lives	2011		2010
Land		$	2,503	$	2,503
Land improvements	7 to 15 years		120		120
Buildings and improvements	7 to 40 years		4,791		4,787
Furniture, fixtures and equipment	3 to 10 years		4,109		3,748
Construction in progress			88		-
			11,611		11,158
Less accumulated depreciation and amortization			4,107		3,605
Net premises and equipment		$	7,504	$	7,553

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Other Assets Held for Sale

12 Months Ended

Dec. 31, 2011

Other Assets Held for Sale [Abstract]

Other Assets Held for Sale

Note 7:   Other Assets Held for Sale

At December 31, 2011 other assets held for sale totaled $532 and consisted of two former branch locations.  During July 2009 the Bank closed its downtown drive-thru location and during February 2009 the new St. Bethlehem Branch opened and the former St. Bethlehem location was closed concurrently.  Both properties were measured for impairment at the time of their respective closing and reclassified to other assets held for sale and are recorded in other real estate owned and repossessed assets on the balance sheet.  The Bank ceased recording depreciation on both properties on their respective reclassification dates.

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Borrowed Funds

12 Months Ended

Dec. 31, 2011

Borrowed Funds [Abstract]

Borrowed Funds

Note 9:   Borrowed Funds

Short- term borrowings.  Short-term borrowings consist of Federal Home Loan Bank (“FHLB”) overnight advances and federal funds purchased and securities sold under agreements to repurchase.  Federal funds purchased are short-term borrowings that typically mature within one to ninety days and reprice daily.  As of December 31, 2011 and 2010 the balances of short-term advances from FHLB were $10,500  and $-0-, respectively.  Securities sold under agreements to repurchase consist of customer funds that are invested overnight in investment securities.   The following table shows the distribution of short-term borrowings, the weighted average interest rates thereon and the maximum month-end balance at the end of each of the last two years.

FHLB Short Term Advances	December 31, 2011			December 31, 2010
Balance at Year End	$	10,500		$	-
Weighted Avg Rate at Year End		0.049	%		-	%
Average Balance During the Year		682			-
Weighted Avg Rate During the Year		0.073	%		-	%
Maximum month-end Balance		10,500			-
Fed Funds Purchased
Balance at Year End	$	-		$	-
Weighted Avg Rate at Year End		-			-
Average Balance During the Year		66			73
Weighted Avg Rate During the Year		1.27	%		1.18	%
Maximum month-end Balance		-			-
Securities Sold Under Agreements to Repurchase
Balance at Year End	$	4,176		$	6,215
Weighted Avg Rate at Year End		0.74	%		1.49	%
Average Balance During the Year		5,475			6,250
Weighted Avg Rate During the Year		1.69	%		1.75	%
Maximum month-end Balance		10,044			10,441

Other short-term borrowings include our liability related to mortgage loans available for repurchase under GNMA optional repurchase programs.  As of December 31, 2011, we recorded approximately $2.2 million of commercial loans and $2.2 million of short-term borrowings in other liabilities on our balance sheet, respectively, as a result of “failed sale” accounting treatment, under the applicable accounting literature, for certain transfers of financial assets.

Federal Home Loan Bank Long Term Borrowings.  The Bank had fixed rate putable advances maturing on January 14, 2015 in the amount of $13,000, putable on January 14, 2010 and quarterly thereafter, with a weighted average rate of 2.99%.  Pursuant to collateral agreements with the FHLB, non-repurchase advances and other overnight facilities, which the Bank utilizes, are secured by qualifying first mortgage loans, commercial real estate, FHLB stock and interest-bearing demand deposits with the FHLB.

Structured Repurchase Agreements.  In a leverage strategy, on April 30, 2008, the Bank entered into two balance sheet leverage transactions (which consisted of four separate repurchase agreements, as set forth below) whereby it borrowed a total of $35,000 in multiple rate repurchase agreements with an initial average cost of 3.67% and invested the proceeds in U. S. Agency pass-through Mortgage Backed Securities (the “Securities”), which were pledged as collateral.  The Bank secured the borrowed funds by Securities valued at 116% of the outstanding principal balance of the borrowings.  The borrowings have original maturity dates ranging from four to ten years, with a weighted average maturity of 5.9 years and certain borrowings have a call option starting with periods ranging from one to two years after origination and are continuously callable after the initial call date.  During the loan term, any collateral that is subject to maturity or call is replaced with other U. S. Agency instruments approved by the lender.

A summary of the material terms of each agreement is set forth below.

Ten Year Non-Putable Three Year Liability Side Structured Repurchase Agreement.  The Bank agreed to transfer approximately $11,800 of U. S. Agency pass-through Mortgage Backed Securities as collateral for a $10,000 repurchase facility, bearing interest at market rates.  The termination for the repurchase facility is April 30, 2018, subject to early cancellation.

Ten Year Non-Putable Two Year Liability Side Structured Repurchase Agreement.  The Bank agreed to transfer approximately $5,900 of U. S. Agency pass-through Mortgage Backed Securities as collateral for a $5,000 repurchase facility, bearing interest at market rates.  The termination for the repurchase facility is April 30, 2018, subject to early cancellation.

Five Year Non-Putable Three Year Bermudan Structured Repurchase Agreement.  The Bank agreed to transfer approximately $11,800 of U. S. Agency pass-through Mortgage Backed Securities as collateral for a $10,000 repurchase facility, bearing interest at market rates.  The termination for the repurchase facility is April 30, 2013, subject to early cancellation.

Four Year Liability Side Structured Repurchase Agreement. The Bank agreed to transfer approximately $10,900 of U. S. Agency pass-through Mortgage Backed Securities as collateral for a $10,000 repurchase facility, bearing interest at market rates.  The termination for the repurchase facility is April 30, 2012.

Term Repurchase Agreements:
Repurchase agreement - rate 3.28%, due April 30, 2018, callable after April 30, 2011	$	10,000
Repurchase agreement - rate 2.96%, due April 30, 2018, callable after April 30, 2010		5,000
Structured repurchase agreement - rate 3.71%, due April 30, 2013, callable after   April 30, 2011, with embedded interest cap at LIBOR of 3.50% starting April 30, 2010		10,000
Structured repurchase agreement - rate 4.39%, due April 30, 2012, with embedded    interest cap at LIBOR of 3.50% starting April 30, 2010		10,000
	$	35,000

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Employee Benefits

12 Months Ended

Dec. 31, 2011

Employee Benefits [Abstract]

Employee Benefits

Note 14:   Employee Benefits

First Advantage Bank 401(k) and Profit Sharing Plan

The Bank has a retirement savings 401(k) and profit-sharing plan covering substantially all employees.  Employees may contribute up to 100% of their compensation, up to allowable limits, with the Bank matching up to three percent on a discretionary basis (no required contributions) based on profitability and other factors.  Participants are fully vested in any deferrals and vest in any employer contributions at a rate of 20% per year of service, with full vesting after five years of service.  Employer contributions charged to expense for the years ended December 31, 2011 and 2010, were $110 and $125, respectively.  The plan was established in 2005.

First Advantage Bank Deferred Compensation Plans

The Bank has a nonqualified deferred compensation agreement with certain retired directors ending December 2012.  The charge to expense related to the agreement was $2 for the years ended December 31, 2011 and 2010, respectively.  Deferred compensation payable under this agreement totaled $62 and $136 as of December 31, 2011 and 2010, respectively.

1998 Nonqualified Deferred Compensation Plan

The Bank has a nonqualified deferred compensation plan for certain active and retired directors and certain retired and active officers.  Interest accrues on the deferred amounts at a rate tied to the rate paid by the Bank on one year certificate accounts at the beginning of each plan year.  During the initial public offering, participants were given a one-time option to move from the 1998 Nonqualified Deferred Compensation Plan to the new Nonqualified Deferred Compensation Plan.  All active participants elected the one-time option.  The remaining retired directors and officers are receiving annual payments under the terms of the deferred compensation plan.  The charge to expense for the agreement was $4 and $8 for the years ended December 31, 2011 and 2010, respectively.  Deferred compensation payable for this plan totaled $384 and $467 as of December 31, 2011 and 2010, respectively.

2007 Deferred Incentive Plan

On January 1, 2007, the Bank implemented a nonqualified deferred compensation agreement with certain executive officers, senior management and other key employees.  The agreement provides the Bank will make contributions to the plan that will vest over a three to five year period.  During the initial public offering participants were given a one-time option to move from the 2007 Deferred Incentive Plan to the new Nonqualified Deferred Compensation Plan.  All participants elected to participate in the Nonqualified Deferred Compensation Plan.  The 2007 Deferred Incentive Plan had no participants during the years ended December 31, 2011 and 2010.

Nonqualified Deferred Compensation Plan

Effective October 1, 2007, the Bank implemented a deferral plan with certain directors, executive officers, senior management and other key employees.  The plan allowed participants the option to convert other cash based deferred compensation plan awards to the new Nonqualified Deferred Compensation Plan.  Amounts transferred into the new Nonqualified Deferred Compensation Plan from the Bank's other deferred compensation plans, which were approximately $1,500, were used by the plan to purchase shares of the Company's stock from its initial public offering.  The provision of the conversion was a one-time event for previous plans.  Additionally directors can elect to contribute fees earned to the plan and are 100% vested.  Employees will vest based on the vesting requirements of the 2007 Deferred Incentive Plan.  The charge to expense for this plan was $138 and $197 for 2011 and 2010, respectively.  Purchased stock recorded as a contra equity account was $1,845, or 187,593 shares, and $1,810, or 178,972 shares, as of December 31, 2011 and 2010, respectively, of which $1,600 and $1,085 was 100% vested by participants as of December 31, 2011 and 2010, respectively.  All participants were 100% vested as of December 31, 2011.   At December 31, 2011 there were 23,974 shares available for award under the plan.

	Number of Shares Awarded		Weighted-Average Fair Value
Non-vested stock as of January 1, 2010		81,763	$	10.07
Purchased		9,395		11.07
Vested		24,173		10.12
Forfeited		7,750		10.12
Non-vested stock as of December 31, 2010		59,235		10.12
Purchased		8,620		13.18
Vested		56,798		10.26
Forfeited		11,057		10.26
Non-vested stock as of December 31, 2011		-	$	-

Total unrecognized compensation cost related to nonvested compensation arrangements purchased under the Plan was $0 and $242 as of December 31, 2011 and 2010, respectively.

The Nonqualified Deferred Compensation Plan provides for fixed payments or a lump sum payment in shares of common stock of the Company after termination from service as defined under Section 409A of the Internal Revenue Code.  The common stock purchased for this Nonqualified Deferred Compensation Plan is maintained in a Rabbi Trust (“Trust”), on behalf of the participants.  The assets of the Trust are subject to the claims of general creditors of the Company.  Dividends payable on the common stock held by the Trust are reinvested in additional shares of common stock of the Company and held in the Trust for the benefit of the participants.  Since the Nonqualified Deferred Compensation Plan does not provide for diversification of the Trust's assets and can only be settled with a fixed number of shares of the Company's common stock, the deferred compensation obligation is classified as a component of shareholders' equity.  Subsequent changes in the fair value of common stock are not reflected in earnings or shareholders' equity of the Company.  The obligations of the Company under the Nonqualified Deferred Compensation Plan, and the shares held by the Trust, have no effect on net income.

Employee Stock Ownership Plan (ESOP)

The Company sponsors a leveraged ESOP that covers substantially all employees who meet certain age and eligibility requirements.  As part of the initial public offering the ESOP purchased 421,174 shares, or approximately 8% of the 5,264,683 shares issued in the offering with the proceeds of a 20-year loan from the Company which is payable in annual installments and bears interest at a rate of 7.5% per annum.

The Bank has committed to make contributions to the ESOP sufficient to support the debt service of the loan.  The loan is secured by the unallocated shares, which are held in a suspense account, and are allocated among the participants as the loan is repaid.  Cash dividends paid on allocated shares are distributed to the participants and cash dividends paid on unallocated shares are used to repay the outstanding debt of the ESOP.

ESOP shares are held by the plan trustee in a suspense account until allocated to participant accounts.  Shares released from the suspense account are allocated to participants on the basis of their relative compensation in the year of allocation.  Participants become vested in the allocated shares over a period of six years.  Any forfeited shares are allocated to other participants in the same proportion as contributions.  The Bank is obligated at the option of each beneficiary to pay out their vested allocations in either shares or cash upon the beneficiary's termination or after retirement.

As ESOP shares are earned by the participants, the Company recognizes compensation expense equal to the fair value of the earned ESOP shares.  Total compensation expense for the years ended December 31, 2011 and 2010 was $273 and $227, respectively.  The ESOP shares as of December 31, 2011 and 2010 were as follows:

	2011		2010
Allocated shares		93,163		68,898
Repurchased shares of beneficiaries		7,955		2,088
Shares committed to be allocated		26,587		26,353
Unreleased shares		298,809		325,396
Total ESOP shares		410,604		418,559
Fair value of unreleased shares at December 31	$	3,848	$	3,947

2008 Equity Incentive Plan

The First Advantage Bancorp 2008 Equity Incentive Plan (“the 2008 Plan”) was approved by the Company's stockholders at the annual meeting of stockholders held on June 11, 2008.  Under the terms of the 2008 Plan, the Company may grant stock awards and stock options to its employees, officers and directors.  The purpose of the 2008 Plan is to promote the success of the Company by linking the personal interests of its employees, officers and directors to the interests of the Company's shareholders, and by providing participants with an incentive for remarkable performance.  All of the Company's employees, officers and directors are eligible to participate in the 2008 Plan.  A committee appointed by the Board of Directors of the Company (which consists of at least two independent directors) (the “Committee”) serves as administrator of the 2008 Plan.  The Committee has sole authority to designate participants; determine the type or types of awards to be granted to each participant and the number, terms and conditions of awards; establish, adopt or revise any rules and regulations as it may deem advisable to administer the 2008 Plan; and make all other decisions and determinations that may be required under the 2008 Plan.

The restricted common stock awards vest at a rate of 20% per year from the date of grant.  The fair market value of the stock awards is based on the market price of the company's stock at the date of grant.

There were 55,279 stock options exercised during 2011.  There were no stock option exercises during 2010.  The total intrinsic value of options exercised during the year ended 2011 and 2010 was $126 and -0-, respectively.  The weighted-average grant-date fair value of options granted was $2.34 for 2011 and 2010, respectively. We use shares repurchased under a repurchase program for share issuances upon exercise of options.

Both incentive stock options and non-qualified stock options were granted under the Plan.  The exercise price for each option was equal to the market price of the Company's stock on the date of grant and the maximum term of each option is ten years.  The vesting period for all options is five years from the date of grant.  The Company recognizes compensation expense over the vesting period, based on the grant-date fair value of the options granted.  The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model.

A summary of the activity in the 2008 Plan as of December 31, 2011, is presented in the following table:

			Non-Vested Stock				Stock Options
			Awards Outstanding				Outstanding
					Weighted-				Weighted-
	Shares				Average				Average
	Available		Number		Grant-Date		Number		Exercise
	for Grant		of Shares		Fair Value		of Shares		Price
Balance, December 31, 2010		34,831		120,953	$	10.29		502,837	$	10.29
Granted		-		-		-		5,000		13.82
Stock options exercised		-		-		-		(55,279)		10.29
Stock awards vested				(29,061)		10.29		-		-
Forfeited		121,687		(33,768)		10.29		(87,919)		10.29
Balance, December 31, 2011		156,518		58,124	$	10.29		364,639	$	10.29

Other information regarding options outstanding and exercisable as of December 31, 2011, is as follows:

	Options Outstanding			Options Exercisable
			Weighted-
			Average
		Weighted-	Remaining		Weighted-
		Average	Contractual	Number	Average
	Number	Exercise	Life	of	Exercise
Range of Exercise Prices	of Shares	Price	in Years	Shares	Price
$10.03   -   $13.82	364,639	$                 10.34	7.1	213,783	$       10.28

The fair value of the 2008 Plan stock options granted is estimated on the measurement date, which, for the Company, is the date of grant using the Black-Scholes option-pricing model.  The weighted-average assumptions used to determine the fair value of options granted in 2011 and 2010 are detailed in the table below:

Risk-free interest rate	3.49%
Dividend yield	2.00%
Expected market price volatility	22.07%
Expected life	6.5 Years

The total intrinsic value of vested stock options at December 31, 2011 was $507.  The total intrinsic value of non-vested stock options at December 31, 2011 was $358.

The fair value of non-vested restricted stock awards for the purposes of recognizing stock-based compensation expense is the market price of the stock award on the measurement date, which, for the Company, is the date of the award.

Stock-based compensation expense totaled $431 in 2011 and $653 in 2010.  Stock-based compensation is recognized ratably over the requisite service period for all awards.  The total income tax benefit recognized in the accompanying consolidated statements of income related to stock-based compensation was approximately $165 in 2011 and $250 in 2010.  Unrecognized stock-based compensation expense related to stock options totaled $292 at December 31, 2011.  At December 31, 2011, the weighted-average period over which the unrecognized expense related to stock options was expected to be recognized was 1.6 years.  Unrecognized stock-based compensation expense related to non-vested restricted awards was $490 at December 31, 2011.  At December 31, 2011, the weighted-average period over which unrecognized expense related to restricted stock awards was expected to be recognized was 1.6 years.

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Quarterly Financial Information

12 Months Ended

Dec. 31, 2011

Quarterly Financial Information [Abstract]

Quarterly Financial Information

Note 19:   Quarterly Financial Information

The quarterly financial statements presented below reflect all adjustments which are, in the opinion of management, necessary to fairly present results of operations for the interim periods indicated:

Unaudited	Three Months Ended
2011	March 31		June 30		September 30		December 31
	(Dollars in thousands)
Interest and dividend income	$	4,370	$	4,437	$	4,350	$	4,498
Interest expense		1,029		997		970		907
Net interest income		3,341		3,440		3,380		3,591
Provision for loan losses		255		233		235		244
Net interest income after provision for loan losses		3,086		3,207		3,145		3,347
Non-interest income		579		683		642		618
Non-interest expense		3,117		3,066		2,928		3,175
Income before provision for income taxes		548		824		859		790
Provision for income taxes		190		338		333		260
Net income	$	358	$	486	$	526	$	530
	Three Months Ended
2010	March 31		June 30		September 30		December 31
	(Dollars in thousands)
Interest and dividend income	$	4,365	$	4,409	$	4,382	$	4,415
Interest expense		1,357		1,284		1,211		1,147
Net interest income		3,008		3,125		3,171		3,268
Provision for loan losses		227		232		248		627
Net interest income after provision for loan losses		2,781		2,893		2,923		2,641
Non-interest income		604		767		697		670
Non-interest expense		2,882		2,921		2,873		2,636
Income before provision for income taxes		503		739		747		675
Provision for income taxes		176		408		275		109
Net income	$	327	$	331	$	472	$	566

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Consolidated Statements of Changes in Stockholders' Equity (USD $) In Thousands, except Share data, unless otherwise specified	Common Stock [Member]	Comprehensive Income [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Common Stock Acquired by Benefit Plan [Member]	Accumulated Other Comprehensive Income [Member]	Total
Balance at Dec. 31, 2009	$ 52		$ 51,915	$ 23,210	$ (7,106)	$ 2,455	$ 70,526
Balance (in shares) at Dec. 31, 2009	5,171,395
Comprehensive income, net of tax:
Net income	0	1,696	0	1,696	0	0	1,696
Change in unrealized appreciation of available-for-sale securities, net of tax	0	119	0	0	0	119	119
Total comprehensive income	0	1,815	0	0	0	0	0
Dividends paid ($0.20 per common share)	0		0	(983)	0	0	(983)
Treasury stock purchase/retire	(6)		(5,776)				(5,782)
Treasury stock purchase/retire (in shares)	(538,901)
Purchase of shares by employee benefit plans	0		102	0	(102)	0	0
Release of shares by employee benefit plans	0		(692)	0	766	0	74
Stock-based compensation	0		1,077	0	0	0	1,077
Balance at Dec. 31, 2010	46		46,626	23,923	(6,442)	2,574	66,727
Balance (in shares) at Dec. 31, 2010	4,632,494						4,107,818
Comprehensive income, net of tax:
Net income	0	1,900	0	1,900	0	0	1,900
Change in unrealized appreciation of available-for-sale securities, net of tax	0	189	0	0	0	189	189
Total comprehensive income	0	2,089	0	0	0	0	0
Dividends paid ($0.20 per common share)	0		0	(923)	0	0	(923)
Treasury stock purchase/retire	(2)		(2,921)				(2,923)
Treasury stock purchase/retire (in shares)	(228,638)
Issuance of retired Treasury stock issued for stock option exercises	1		569				570
Issuance of retired Treasury stock issued for stock option exercises (in shares)	55,279
Purchase of shares by employee benefit plans	0		119	0	(119)	0	0
Release of shares by employee benefit plans	0		(656)	0	749	0	93
Stock-based compensation	0		842	0	0	0	842
Balance at Dec. 31, 2011	$ 45		$ 44,579	$ 24,900	$ (5,812)	$ 2,763	$ 66,475
Balance (in shares) at Dec. 31, 2011	4,459,135						4,038,260

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Restriction on Cash and Due From Banks

12 Months Ended

Dec. 31, 2011

Restriction on Cash and Due From Banks [Abstract]

Restriction on Cash and Due From Banks

Note 3:   Restriction on Cash and Due From Banks

The Bank is required to maintain reserve funds in cash and/or on deposits for certain correspondent relationships.  There was no reserve required, at December 31, 2011 or 2010.

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Related-Party Transactions

12 Months Ended

Dec. 31, 2011

Related-Party Transactions [Abstract]

Related-Party Transactions

Note 13:   Related-Party Transactions

At December 31, 2011 and 2010, the Bank had loans outstanding to executive officers, directors and their related interests (related parties), in the amount of $11,184 and $10,498, respectively.

In management's opinion, such loans and other extensions of credit and deposits were made in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons.  Further, in management's opinion, these loans did not involve more than normal risk of collectibility or present other unfavorable features.

	December 31,
	2011			2010
Beginning balance	$	10,498		$	9,103
New loans and advances		11,266			6,863
Repayments		(10,580	)		(5,468	)
Ending balance	$	11,184		$	10,498

Excluding the holding company demand deposit account, deposits from related parties held by the Bank, at December 31, 2011 and 2010, totaled $3,051 and $2,488, respectively.