There were $2.0 million and $1.7 million of loans held for sale at September 30, 2011 and December 31, 2010, respectively.

The credit quality indicator utilized by the Company to internally analyze the loan portfolio is the internal risk rating. Internal risk ratings of 0 to 5 are considered pass credits, a risk rating of a 6 is special mention, a risk rating of a 7 is substandard, and a risk rating of an 8 is doubtful. Loans classified as pass credits have no identified material weaknesses and are performing as agreed. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following table presents the commercial loan portfolio by internal risk rating:

Sep. 30, 2011	Commercial			Construction	Commercial Real Estate
Internal Risk Rating	Closed end	Lines of Credit	Agriculture & AG RE	Land & Development	Owner-Occupied	Non-Owner Occupied	Total
1-2	$ 1,215	$ 313	$ 4,579	$ 3,758	$ 3,782	$ 836	$ 14,483
3	3,354	5,066	13,056	1,122	10,072	18,645	51,315
4	18,016	21,641	14,669	1,743	72,871	47,550	176,490
5	10,117	3,301	3,411	6,157	21,113	51,963	96,062
6	3,039	3,849	2,103	5,672	6,331	17,258	38,252
7	2,076	1,558	65	25,778	20,007	29,741	79,225
8	-	-	-	-	-	-	-
Total	$ 37,817	$ 35,728	$ 37,883	$ 44,230	$ 134,176	$ 165,993	$ 455,827

Dec. 31, 2010	Commercial			Construction	Commercial Real Estate
Internal Risk Rating	Closed end	Lines of Credit	Agriculture & AG RE	Land & Development	Owner-Occupied	Non-Owner Occupied	Total
1-2	$ 2,294	$ 331	$ 8,527	$ 4,700	$ 8,559	$ 1,479	$ 25,890
3	3,935	7,333	10,873	1,237	17,673	23,045	64,096
4	21,225	24,042	16,742	1,500	76,491	61,468	201,468
5	10,483	4,768	3,588	8,720	21,389	42,495	91,443
6	1,217	4,506	42	7,232	3,206	20,821	37,024
7	2,149	4,898	4,517	48,689	25,075	40,507	125,835
8	-	45	-	-	-	-	45
Total	$ 41,303	$ 45,923	$ 44,289	$ 72,078	$ 152,393	$ 189,815	$ 545,801

The retail residential loan portfolio is generally unrated. Delinquency is a typical factor in adversely risk rating a credit to a special mention or substandard. The following table presents the retail residential loan portfolio by internal risk rating:

	Residential – 1-4 family
	Senior Lien	JR Lien & Lines of Credit	Total
Sep. 30, 2011
Unrated	$ 96,512	$ 52,245	$ 148,757
Special mention	1,266	925	2,191
Substandard	9,657	1,414	11,071
Total	$ 107,435	$ 54,584	$ 162,019

	Residential – 1-4 family
	Senior Lien	JR Lien & Lines of Credit	Total
Dec. 31, 2010
Unrated	$ 99,852	$ 55,147	$ 154,999
Special mention	1,034	1,769	2,803
Substandard	13,707	1,157	14,864
Total	$ 114,593	$ 58,073	$ 172,666

An analysis of the activity in the allowance for loan losses for the nine months ended September 30, 2011 and 2010 follows:

The following is an analysis on the balance and allowance for loan loss for impaired loans as of September 30, 2011 and December 31, 2010:

The Company had troubled debt restructurings ("TDRs") of $7.3 million and $5.3 million as of September 30, 2011 and December 31, 2010, respectively. Specific reserves of $0.7 million and $0.4 million were allocated to TDRs as of September 30, 2011 and December 31, 2010, respectively. At September 30, 2011, nonaccrual TDR loans were $4.5 million, as compared to $5.0 million at December 31, 2010. At September 30, 2011 and December 31, 2010, $2.8 million and $0.3 million of TDRs were on accrual status. The Company has not committed to lend any additional amounts to customers with outstanding loans that are classified as TDRs as of September 30, 2011.

During the period ending September 30, 2011, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan to a below market rate or the payment modification to interest only. Modifications involving a reduction of the stated interest rate of the loan were for periods ranging from 6 months to 16 months.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three and nine month period ending September 30, 2011:

The troubled debt restructurings described increased the allowance for loan losses by $0.09 million and $0.7 million and resulted in no charge offs during the three and nine month periods ending September 30, 2011.

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three and nine month periods ending September 30, 2011.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. The troubled debt restructurings that subsequently defaulted described above did not increase the allowance for loan losses and resulted in charge off's of $0.0 million and $0.4 million for the three and nine month periods ending September 30, 2011.

The Company evaluates loan modifications to determine if the modification constitutes a troubled debt restructure. A loan modification constitutes a troubled debt restructure if the borrower is experiencing financial difficulty and the Company grants a concession it would not otherwise consider. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its loans with the Company's debt in the foreseeable future without the modification. This evaluation is performed under the company's internal underwriting guidelines. TDRs are separately identified for impairment disclosures. If a loan is considered to be collateral dependent loan, the TDR is reported, net, at the fair value of the collateral.

Cash basis interest income recognized during the three and nine months ended September 30, 2011, totaled $0.8 million and $2.1 million, respectively.

Due to the economic conditions facing many of its customers, the Company determined that there were $37.5 million and $56.5 million of loans that were classified as impaired but were considered to be performing loans at September 30, 2011 and December 31, 2010, respectively.

The following table represents data for nonaccrual loans. Included in the September 30, 2011 and December 31, 2010 totals are $4.5 million and $5.0 million of TDRs. Excluded are the accruing TDRs of $2.8 million and $0.3 million, respectively:

Nonperforming loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.