2. LOANS

The composition of the Company's loan portfolio, by loan class, is as follows:

($ in thousands)	June 30, 2012			December 31, 2011

Commercial	$	95,106		$	91,914
Commercial Real Estate		186,180			175,793
Agriculture		45,632			52,064
Residential Mortgage		50,912			51,586
Residential Construction		7,731			7,492
Consumer		61,491			64,150

		447,052			442,999
Allowance for loan losses		(9,784	)		(10,408	)
Net deferred origination fees and costs		673			198

Loans, net	$	437,941		$	432,789

The Company manages asset quality and credit risk by maintaining diversification in its loan portfolio and through review processes that include analysis of credit requests and ongoing examination of outstanding loans and delinquencies, with particular attention to portfolio dynamics and loan mix. The Company strives to identify loans experiencing difficulty early enough to correct the problems, to record charge-offs promptly based on realistic assessments of collectability and current collateral values and to maintain an adequate allowance for loan losses at all times. Asset quality reviews of loans and other non-performing assets are administered using credit risk rating standards and criteria similar to those employed by state and federal banking regulatory agencies.

Residential mortgage loans, which are secured by real estate, are primarily susceptible to four risks; non-payment due to diminished or lost income, over-extension of credit, a lack of borrower's cash flow to sustain payments, and shortfalls in collateral value. In general, non-payment is usually due to loss of employment and follows general economic trends in the economy, particularly the upward movement in the unemployment rate, loss of collateral value, and demand shifts.

Commercial real estate loans generally fall into two categories, owner-occupied and non-owner occupied. Loans secured by owner occupied real estate are primarily susceptible to changes in the market conditions of the related business. This may be driven by, among other things, industry changes, geographic business changes, changes in the individual financial capacity of the business owner, general economic conditions and changes in business cycles. These same risks apply to commercial loans whether secured by equipment, receivables or other personal property or unsecured. Losses on loans secured by owner occupied real estate, equipment, or other personal property generally are dictated by the value of underlying collateral at the time of default and liquidation of the collateral. When default is driven by issues related specifically to the business owner, collateral values tend to provide better repayment support and may result in little or no loss. Alternatively, when default is driven by more general economic conditions, underlying collateral generally has devalued more and results in larger losses due to default. Loans secured by non-owner occupied real estate are primarily susceptible to risks associated with swings in occupancy or vacancy and related shifts in lease rates, rental rates or room rates. Most often, these shifts are a result of changes in general economic or market conditions or overbuilding and resulting over-supply of space. Losses are dependent on the value of underlying collateral at the time of default. Values are generally driven by these same factors and influenced by interest rates and required rates of return as well as changes in occupancy costs. Collateral values may be determined by appraisals obtained through Bank approved, licensed appraisers, qualified independent third parties, sales invoices, or other appropriate means. Collateral valuations are obtained at origination of the credit and periodically thereafter (generally every 3 - 6 months depending on the collateral type), once repayment is questionable, and the loan has been deemed classified.

Construction loans, whether owner occupied or non-owner occupied residential development loans, are not only susceptible to the related risks described above but the added risks of construction, including cost over-runs, mismanagement of the project, or lack of demand and market changes experienced at time of completion. Losses are primarily related to underlying collateral value and changes therein as described above. Problem construction loans are generally identified by periodic review of financial information that may include financial statements, tax returns and payment history of the borrower. Based on this information the Company may decide to take any of several courses of action including demand for repayment, requiring the borrower to provide a significant principal payment and/or additional collateral or requiring similar support from guarantors, or repossession or foreclosure of the underlying collateral. Collateral values may be determined by appraisals obtained through Bank approved, licensed appraisers, qualified independent third parties, purchase invoices, or other appropriate documentation. Collateral valuations are obtained at origination of the credit and periodically thereafter (generally every 3 - 6 months depending on the collateral type), once repayment is questionable, and the loan has been deemed classified.

Agricultural loans, whether secured or unsecured, generally are made to producers and processors of crops and livestock. Repayment is primarily from the sale of an agricultural product or service. Agricultural loans are generally secured by inventory, receivables, equipment, and other real property. Agricultural loans primarily are susceptible to changes in market demand for specific commodities. This may be exacerbated by, among other things, industry changes, changes in the individual financial capacity of the business owner, general economic conditions and changes in business cycles, as well as adverse weather conditions. Problem agricultural loans are generally identified by periodic review of financial information that may include financial statements, tax returns, crop budgets, payment history, and crop inspections. Based on this information, the Company may decide to take any of several courses of action including demand for repayment, requiring the borrower to provide a significant principal payment and/or additional collateral or requiring similar support from guarantors. Notwithstanding, when repayment becomes unlikely based on the borrower's income and cash flow, repossession or foreclosure of the underlying collateral may become necessary. Collateral values may be determined by appraisals obtained through Bank approved, licensed appraisers, qualified independent third parties, purchase invoices, or other appropriate documentation. Collateral valuations are obtained at origination of the credit and periodically thereafter (generally every 3 - 6 months depending on the collateral type), once repayment is questionable, and the loan has been deemed classified.

Commercial loans, whether secured or unsecured, generally are made to support the short-term operations and other needs of small businesses. These loans are generally secured by the receivables, equipment, and other real property of the business and are susceptible to the related risks described above. Problem commercial loans are generally identified by periodic review of financial information that may include financial statements, tax returns, and payment history of the borrower. Based on this information, the Company may decide to take any of several courses of action including demand for repayment, requiring the borrower to provide a significant principal payment and/or additional collateral or requiring similar support from guarantors. Notwithstanding, when repayment becomes unlikely based on the borrower's income and cash flow, repossession or foreclosure of the underlying collateral may become necessary. Collateral values may be determined by appraisals obtained through Bank approved, licensed appraisers, qualified independent third parties, purchase invoices, or other appropriate documentation. Collateral valuations are obtained at origination of the credit and periodically thereafter (generally every 3 - 6 months depending on the collateral type), once repayment is questionable, and the loan has been deemed classified.

Consumer loans, whether unsecured or secured are primarily susceptible to four risks; non-payment due to diminished or lost income, over-extension of credit, a lack of borrower's cash flow to sustain payments, and shortfall in collateral value. In general, non-payment is usually due to loss of employment and will follow general economic trends in the economy, particularly the upward movements in the unemployment rate, loss of collateral value, and demand shifts.

As of June 30, 2012, approximately 42% in principal amount of the Company's loans were secured by commercial real estate, which consists of construction and land development loans and real estate loans. Approximately 11% of the Company's loans were residential mortgage loans. Approximately 2% of the Company's loans were residential construction loans. Approximately 10% of the Company's loans were for agriculture and 21% of the Company's loans were for general commercial uses including professional, retail and small businesses. Approximately 14% of the Company's loans were consumer loans.

Once a loan becomes delinquent and repayment becomes questionable, a Company collection officer will address collateral shortfalls with the borrower and attempt to obtain additional collateral or a principal payment. If this is not forthcoming and payment in full is unlikely, the Company will estimate its probable loss, using a recent valuation as appropriate to the underlying collateral less estimated costs of sale, and charge-off the loan down to the estimated net realizable amount. Depending on the length of time until final collection, the Company may periodically revalue the underlying collateral and take additional charge-offs as warranted. Revaluations may occur as often as every 3-12 months depending on the underlying collateral and volatility of values. Final charge-offs or recoveries are taken when collateral is liquidated and actual loss is known. Unpaid balances on loans after or during collection and liquidation may also be pursued through legal action and attachment of wages or judgment liens on the borrower's other assets.

All loans at June 30, 2012 and December 31, 2011 were pledged under a blanket collateral lien to secure actual and potential borrowings from the Federal Home Loan Bank and Federal Reserve.

Non-accrual and Past Due Loans

The Company's non-accrual loans by loan class, as of June 30, 2012 and December 31, 2011 were as follows:

($ in thousands)	June 30, 2012		December 31, 2011

Commercial	$	3,042	$	2,905
Commercial Real Estate		4,057		3,071
Agriculture		899		992
Residential Mortgage		1,006		1,334
Residential Construction		42		48
Consumer		236		360

	$	9,282	$	8,710

Non-accrual loans amounted to $9,282,000 at June 30, 2012 and were comprised of four residential mortgage loans totaling $1,006,000, one residential construction loans totaling $42,000, eight commercial real estate loans totaling $4,057,000, one agricultural loan totaling $899,000, eleven commercial loans totaling $3,042,000 and five consumer loans totaling $236,000. Non-accrual loans amounted to $8,710,000 at December 31, 2011 and were comprised of four residential mortgage loans totaling $1,334,000, one residential construction loan totaling $48,000, six commercial real estate loans totaling $3,071,000, one agricultural loan totaling $992,000, twelve commercial loans totaling $2,905,000 and five consumer loans totaling $360,000. It is generally the Company's policy to charge-off the portion of any non-accrual loan that the Company does not expect to collect by writing the loan down to the estimated net realizable value of the underlying collateral.

An age analysis of past due loans, segregated by loan class, as of June 30, 2012 and December 31, 2011 is as follows:

($ in thousands)	30-59 Days Pas t Due		60-8 Days Pas t Due		90 Days or more Past Due		Total Past Due		Current		Total Loans
June 30, 2012
Commercial	$	187	$	-	$	2,809	$	2,996	$	92,110	$	95,106
Commercial Real Estate		192		-		3,865		4,057		182,123		186,180
Agriculture		9		-		899		908		44,724		45,632
Residential Mortgage		1,237		543		129		1,909		49,003		50,912
Residential Construction		41		-		42		83		7,648		7,731
Consumer		100		-		157		257		61,234		61,491
Total	$	1,766	$	543	$	7,901	$	10,210	$	436,842	$	447,052

December 31, 2011
Commercial	$	1,051	$	166	$	113	$	1,330	$	90,584	$	91,914
Commercial Real Estate		-		2,746		446		3,192		172,601		175,793
Agriculture		-		-		991		991		51,073		52,064
Residential Mortgage		792		420		426		1,638		49,948		51,586
Residential Construction		273		-		48		321		7,171		7,492
Consumer		20		212		225		457		63,693		64,150
Total	$	2,136	$	3,544	$	2,249	$	7,929	$	435,070	$	442,999

The Company had no loans 90 days or more past due and still accruing at June 30, 2012 and December 31, 2011.

Impaired Loans

Impaired loans, segregated by loan class, as of June 30, 2012 and December 31, 2011 were as follows:

($ in thousands)	Unpaid Contractual Principal Balance		Recorded Investmen t with no Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance
June 30, 2012
Commercial	$	4,094	$	2,982	$	840	$	3,822	$	151
Commercial Real Estate		5,991		4,057		1,181		5,238		16
Agriculture		1,721		1,379		-		1,379		-
Residential Mortgage		4,227		1,006		2,981		3,987		1,148
Residential Construction		1,288		42		1,085		1,127		573
Consumer		1,287		274		798		1,072		138
Total	$	18,608	$	9,740	$	6,885	$	16,625	$	2,026

December 31, 2011
Commercial	$	4,694	$	2,919	$	569	$	3,488	$	101
Commercial Real Estate		4,856		3,071		1,198		4,269		22
Agriculture		3,847		3,598		-		3,598		-
Residential Mortgage		5,336		1,875		3,194		5,069		731
Residential Construction		1,147		48		1,099		1,147		668
Consumer		985		309		346		655		126
Total	$	20,865	$	11,820	$	6,406	$	18,226	$	1,648

Interest income on impaired loans recognized using a cash-basis method of accounting during the three-month periods ended June 30, 2012 and 2011 was as follows:

($ in thousands)	Three Months Ended June 30, 2012				Three Months Ended June 30, 2011
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial	$	3,831	$	10	$	3,248	$	23
Commercial Real Estate		4,954		23		9,587		244
Agriculture		1,475		9		1,988		-
Residential Mortgage		3,761		31		6,072		40
Residential Construction		1,210		14		1,692		24
Consumer		1,007		9		361		1
Total	$	16,238	$	96	$	22,948	$	332

Interest income on impaired loans recognized using a cash-basis method of accounting during the six-month periods ended June 30, 2012 and 2011 was as follows:

($ in thousands)	Six Months Ended June 30, 2012				Six Months Ended June 30, 2011
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial	$	3,657	$	21	$	3,163	$	40
Commercial Real Estate		5,434		45		8,754		300
Agriculture		1,706		35		2,037		5
Residential Mortgage		4,438		60		6,059		88
Residential Construction		1,251		26		1,669		40
Consumer		815		16		339		4
Total	$	17,301	$	203	$	22,021	$	477

Troubled Debt Restructurings

The Company's loan portfolio includes certain loans that have been modified in a Troubled Debt Restructuring ("TDR"), which are loans on which concessions in terms have been granted because of the borrowers' financial difficulties. These concessions typically result from the Company's loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are placed on non-accrual status at the time of restructure and may only be returned to accruing status after considering the borrower's sustained repayment performance for a reasonable period, generally six months.

When a loan is modified, it is measured based upon the present value of future cash flows discounted at the contractual interest rate of the original loan agreement, or the fair value of collateral less selling costs if the loan is collateral dependent. If the value of the modified loan is less than the recorded investment in the loan, impairment is recognized through a specific allowance or a charge-off of the loan.

The Company had $7,096,000 and $9,410,000 in TDR loans as of June 30, 2012 and December 31, 2011, respectively. Specific reserves for TDR loans totaled $1,848,000 and $1,596,000 as of June 30, 2012 and December 31, 2011, respectively. TDR loans performing in compliance with modified terms totaled $4,769,000 and $7,471,000 as of June 30, 2012 and December 31, 2011, respectively.

Loans modified as troubled debt restructurings during the three-month periods ended June 30, 2012 and June 30, 2011 were as follows:

($ in thousands)	Three Months Ended June 30, 2012
	Number of Contracts		Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment
Commercial		2	$	141	$	141
Consumer		2		279		279
Total		4	$	420	$	420

($ in thousands)	Three Months Ended June 30, 2011
	Number of Contracts		Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment
Residential Construction		1	$	86	$	27
Total		1	$	86	$	27

Loans modified as troubled debt restructurings during the six-month periods ended June 30, 2012 and June 30, 2011 were as follows:

($ in thousands)	Six Months Ended June 30, 2012
	Number of Contracts		Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment
CommercialA		4	$	361	$	361
Consumer		4		430		430
Total		8	$	791	$	791

($ in thousands)	Six Months Ended June 30, 2011
	Number of Contracts		Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment
Commercial		1	$	48	$	48
Residential Mortgage		1		404		404
Residential Construction		2		221		162
Total		4	$	673	$	614

The loan modifications generally involved reductions in the interest rate, payment extensions, forgiveness of principal, and forbearance. There were no loans modified as a troubled debt restructuring within the previous 12 months and for which there was a payment default during the three-month periods ended June 30, 2012 and June 30, 2011. There was one commercial loan with a recorded investment of $136,000 that was modified as a troubled debt restructuring within the previous 12 months and for which there was a payment default during the six-month period ended June 30, 2012. There was one consumer loan with a recorded investment of $25,000 that was modified as a troubled debt restructuring within the previous 12 months and for which there was a payment default during the six-month period ended June 30, 2011.

Credit Quality Indicators

All new loans are rated using the credit risk ratings and criteria adopted by the Company. Risk ratings are adjusted as future circumstances warrant. All credits risk rated 1, 2, 3 or 4 equate to a Pass as indicated by Federal and State regulatory agencies; a 5 equates to a Special Mention; a 6 equates to Substandard; a 7 equates to Doubtful; and 8 equates to a Loss. General definitions for each risk rating are as follows:

Risk Rating "1" - Pass (High Quality): This category is reserved for loans fully secured by Company CD's or savings and properly margined (as defined in the Company's Credit Policy) and actively traded securities (including stocks, as well as corporate, municipal and U.S. Government bonds).

Risk Rating "2" - Pass (Above Average Quality): This category is reserved for borrowers with strong balance sheets that are well structured with manageable levels of debt and good liquidity. Cash flow is sufficient to service all debt as agreed. Historical earnings, cash flow, and payment performance have all been strong and trends are positive and consistent. Collateral protection is better than the Company's Credit Policy guidelines.

Risk Rating "3" - Pass (Average Quality): Credits within this category are considered to be of average, but acceptable, quality. Loan characteristics, including term and collateral advance rates, meet the Company's Credit Policy guidelines; unsecured lines to borrowers with above average liquidity and cash flow may be considered for this category; the borrower's financial strength is well documented, with adequate, but consistent, cash flow to meet all obligations. Liquidity should be sufficient and leverage should be moderate. Monitoring of collateral may be required, including a borrowing base or construction budget. Alternative financing is typically available.

Risk Rating "4" - Pass (Below Average Quality): Credits within this category are considered sound, but merit additional attention due to industry concentrations within the borrower's customer base, problems within their industry, deteriorating financial or earnings trends, declining collateral values, increased frequency of past due payments and/or overdrafts, discovery of documentation deficiencies which may impair our borrower's ability to repay, or the Company's ability to liquidate collateral. Financial performance is average but inconsistent. There also may be changes of ownership, management or professional advisors, which could be detrimental to the borrower's future performance.

Risk Rating "5" - Special Mention (Criticized): Loans in this category are currently protected by their collateral value and have no loss potential identified, but have potential weaknesses which may, if not monitored or corrected, weaken our ability to collect payments from the borrower or satisfactorily liquidate our collateral position. Loans where terms have been modified due to their failure to perform as agreed may be included in this category. Adverse trends in the borrower's operation, such as reporting losses or inadequate cash flow, increasing and unsatisfactory leverage, or an adverse change in economic or market conditions may have weakened the borrower's business and impaired their ability to repay based on original terms. The condition or value of the collateral has deteriorated to the point where adequate protection for our loan may be jeopardized in the future. Loans in this category are in transition and, generally, do not remain in this category beyond 12 months. During this time, efforts are focused on strategies aimed at upgrading the credit or locating alternative financing.

Risk Rating "6" - Substandard (Classified): Loans in this category are inadequately protected by the borrower's net worth, capacity to repay or collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. There exists a strong possibility of loss if the deficiencies are not corrected. Loans that are dependent on the liquidation of collateral to repay are included in this category, as well as borrowers in bankruptcy or where legal action is required to effect collection of our debt.

Risk Rating "7" - Doubtful (Classified): Loans in this category indicate all of the weaknesses of a Substandard classification, however, collection of loan principal, in full, is highly questionable and improbable; possibility of loss is very high, but there is still a possibility that certain collection strategies may, yet, be successful, rendering a definitive loss difficult to estimate, at the time. Loans in this category are in transition and, generally, do not remain in this category more than 6 months.

Risk Rating "8" - Loss (Classified):

Active Charge-Off. Loans in this category are considered uncollectible and of such little value that their removal from the Company's books is required. The charge-off is pending or already processed. Collateral positions have been or are in the process of being liquidated and the borrower/guarantor may or may not be cooperative in repayment of the debt. Recovery prospects are unknown at the time, but we are still actively engaged in the collection of the loan.

Inactive Charge-Off. Loans in this category are considered uncollectible and of such little value that their removal from the Company's books is required. The charge-off is pending or already processed. Collateral positions have been liquidated and the borrower/guarantor has nothing of any value remaining to apply to the repayment of our loan. Any further collection activities would be of little value.

The following table presents the risk ratings by loan class as of June 30, 2012 and December 31, 2011.

($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Loss		Total
June 30, 2012
Commercial	$	85,002	$	3,427	$	6,677	$	-	$	-	$	95,106
Commercial Real Estate		160,817		12,010		13,353		-		-		186,180
Agriculture		43,039		1,214		1,379		-		-		45,632
Residential Mortgage		41,924		1,936		7,052		-		-		50,912
Residential Construction		5,613		385		1,733		-		-		7,731
Consumer		54,721		3,156		3,540		74		-		61,491
Total	$	391,116	$	22,128	$	33,734	$	74	$	-	$	447,052

December 31, 2011
Commercial	$	71,229	$	8,444	$	11,804	$	437	$	-	$	91,914
Commercial Real Estate		148,317		16,492		10,984		-		-		175,793
Agriculture		48,330		-		3,734		-		-		52,064
Residential Mortgage		42,845		1,830		6,911		-		-		51,586
Residential Construction		5,140		927		1,425		-		-		7,492
Consumer		58,239		2,824		3,087		-		-		64,150
Total	$	374,100	$	30,517	$	37,945	$	437	$	-	$	442,999

Allowance for Loan Losses

The following table details activity in the allowance for loan losses by loan class for the three-month and six-month periods ended June 30, 2012.

Three-month period ended June 30, 2012
($ in thousands)	Commercial			Commercial Real Estate			Agriculture			Residential Mortgage		Residential Construction			Consumer			Unallocated			Total
Balance as of March 31, 2012	$	3,582		$	1,715		$	1,167		$	1,194	$	1,125		$	1,340		$	234		$	10,357
Provision for loan losses		(294	)		689			73			422		(253	)		110			(71	)		676

Charge-offs		(537	)		(342	)		(115	)		-		(161	)		(370	)		-			(1,525	)
Recoveries		31			-			1			-		223			21			-			276
Net charge-offs		(506	)		(342	)		(114	)		-		62			(349	)		-			(1,249	)
Balance as of June 30, 2012		2,782			2,062			1,126			1,616		934			1,101			163			9,784

Six-month period ended June 30, 2012
($ in thousands)	Commercial			Commercial Real Estate			Agriculture			Residential Mortgage			Residential Construction			Consumer			Unallocated		Total
Balance as of December 31, 2011	$	3,598		$	1,747		$	1,934		$	1,135		$	1,198		$	796		$	-	$	10,408
Provision for loan losses		26			657			(696	)		512			(327	)		891			163		1,226

Charge-offs		(1,079	)		(342	)		(115	)		(31	)		(161	)		(634	)		-		(2,362	)
Recoveries		237			-			3			-			224			48			-		512
Net charge-offs		(842	)		(342	)		(112	)		(31	)		63			(586	)		-		(1,850	)
Balance as of June 30, 2012		2,782			2,062			1,126			1,616			934			1,101			163		9,784

The following table details the allowance for loan losses allocated to loans individually and collectively evaluated for impairment by loan class as of June 30, 2012.

($ in thousands)	Commercial		Commercial Real Estate		Agriculture		Residential Mortgage		Residential Construction		Consumer		Unallocated		Total
Period-end amount allocated to:
Loans individually evaluated for impairment		151		16		-		1,148		573		138		-		2,026
Loans collectively evaluated for impairment		2,631		2,046		1,126		468		361		963		163		7,758
Ending Balance	$	2,782	$	2,062	$	1,126	$	1,616	$	934	$	1,101	$	163	$	9,784

The following table details activity in the allowance for loan losses by loan class for the three-month and six-month periods ended June 30, 2011.

Three-month period ended June 30, 2011
($ in thousands)	Commercial			Commercial Real Estate			Agriculture			Residential Mortgage			Residential Construction			Consumer			Unallocated		Total
Balance as of March 31, 2011	$	3,403		$	2,870		$	2,120		$	1,030		$	1,401		$	689		$	199	$	11,712
Provision for loan losses		681			15			639			83			(16	)		9			79		1,490

Charge-offs		(458	)		(1,406	)		(320	)		(173	)		(198	)		(228	)		-		(2,783	)
Recoveries		3			147			116			10			51			38			-		365
Net charge-offs		(455	)		(1,259	)		(204	)		(163	)		(147	)		(190	)		-		(2,418	)
Balance as of June 30, 2011		3,629			1,626			2,555			950			1,238			508			278		10,784

Six-month period ended June 30, 2011
($ in thousands)	Commercial			Commercial Real Estate			Agriculture			Residential Mortgage			Residential Construction			Consumer			Unallocated		Total
Balance as of December 31, 2010	$	3,761		$	1,957		$	2,141		$	830		$	1,719		$	556		$	75	$	11,039
Provision for loan losses		482			935			618			300			(334	)		276			203		2,480

Charge-offs		(636	)		(1,413	)		(320	)		(191	)		(198	)		(448	)		-		(3,206	)
Recoveries		22			147			116			11			51			124			-		471
Net charge-offs		(614	)		(1,266	)		(204	)		(180	)		(147	)		(324	)		-		(2,735	)
Balance as of June 30, 2011		3,629			1,626			2,555			950			1,238			508			278		10,784

The following table details the allowance for loan losses allocated to loans individually and collectively evaluated for impairment by loan class as of June 30, 2011.

($ in thousands)	Commercial		Commercial Real Estate		Agriculture		Residential Mortgage		Residential Construction		Consumer		Unallocated		Total
Period-end amount allocated to:
Loans individually evaluated for impairment		277		221		-		622		606		2		-		1,728
Loans collectively evaluated for impairment		3,352		1,405		2,555		328		632		506		278		9,056
Ending Balance	$	3,629	$	1,626	$	2,555	$	950	$	1,238	$	508	$	278	$	10,784

The following table details activity in the allowance for loan losses and the amount allocated to loans individually and collectively evaluated for impairment as of and for the period ended December 31, 2011.

($ in thousands)	Commercial			Commercial Real Estate			Agriculture			Residential Mortgage			Residential Construction			Consumer			Unallocated			Total
Balance as of December 31, 2010	$	3,761		$	1,957		$	2,141		$	830		$	1,719		$	556		$	75		$	11,039
Provision for loan losses		2,033			1,502			511			566			(395	)		996			(75	)		5,138

Charge-offs		(2,381	)		(2,000	)		(860	)		(272	)		(197	)		(932	)		-			(6,642	)
Recoveries		185			288			142			11			71			176			-			873
Net charge-offs		(2,196	)		(1,712	)		(718	)		(261	)		(126	)		(756	)		-			(5,769	)
Balance as of December 31, 2011		3,598			1,747			1,934			1,135			1,198			796			-			10,408
Period-end amount allocated to:
Loans individually evaluated for impairment		101			22			-			731			668			126			-			1,648
Loans collectively evaluated for impairment		3,497			1,725			1,934			404			530			670			-			8,760
Ending Balance	$	3,598		$	1,747		$	1,934		$	1,135		$	1,198		$	796		$	-		$	10,408

The Company's investment in loans as of June 30, 2012, June 30, 2011, and December 31, 2011 related to each balance in the allowance for loan losses by loan class and disaggregated on the basis of the Company's impairment methodology was as follows:

($ in thousands)	Commercial		Commercial Real Estate		Agriculture		Residential Mortgage		Residential Construction		Consumer		Total
June 30, 2012
Loans individually evaluated for impairment	$	3,822	$	5,238	$	1,379	$	3,987	$	1,127	$	1,072	$	16,625
Loans collectively evaluated for impairment		91,284		180,942		44,253		46,925		6,604		60,419		430,427
Ending Balance	$	95,106	$	186,180	$	45,632	$	50,912	$	7,731	$	61,491	$	447,052

June 30, 2011
Loans individually evaluated for impairment	$	3,760	$	12,202	$	1,843	$	5,751	$	1,396	$	301	$	25,253
Loans collectively evaluated for impairment		77,628		169,798		50,121		45,688		6,535		67,108		416,878
Ending Balance	$	81,388	$	182,000	$	51,964	$	51,439	$	7,931	$	67,409	$	442,131

December 31, 2011
Loans individually evaluated for impairment	$	3,488	$	4,269	$	3,598	$	5,069	$	1,147	$	655	$	18,226
Loans collectively evaluated for impairment		88,426		171,524		48,466		46,517		6,345		63,495		424,773
Ending Balance	$	91,914	$	175,793	$	52,064	$	51,586	$	7,492	$	64,150	$	442,999