NOTE 4. LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans

The Bank engages in a full complement of lending activities, including real estate-related loans, agriculture-related loans, commercial and financial loans and consumer installment loans within select markets in Georgia, Alabama, Florida and South Carolina. The Bank concentrates the majority of its lending activities in real estate loans. While risk of loss in the Company's portfolio is primarily tied to the credit quality of the various borrowers, risk of loss may increase due to factors beyond the Company's control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the real estate portfolio.

A substantial portion of the Bank's loans are secured by real estate in the Bank's primary market area. In addition, a substantial portion of the OREO is located in those same markets. Accordingly, the ultimate collectability of a substantial portion of the Bank's loan portfolio and the recovery of a substantial portion of the carrying amount of OREO are susceptible to changes in real estate conditions in the Bank's primary market area.

Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop production, and other business purposes. Short-term working capital loans are secured by non-real estate collateral such as accounts receivable, crops, inventory and equipment. The Company evaluates the financial strength, cash flow, management, credit history of the borrower and the quality of the collateral securing the loan. The Bank often requires personal guarantees and secondary sources of repayment on commercial, financial and agricultural loans.

Real estate loans include construction and development loans, commercial and farmland loans and residential loans. Construction and development loans include loans for the development of residential neighborhoods, construction of one-to-four family residential construction loans to builders and consumers, and commercial real estate construction loans, primarily for owner-occupied properties. The Company limits its construction lending risk through adherence to established underwriting procedures. Commercial real estate loans include loans secured by owner-occupied commercial buildings for office, storage, retail, farmland and warehouse space. They also include non-owner occupied commercial buildings such as leased retail and office space. Commercial real estate loans may be larger in size and may involve a greater degree of risk than one-to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties. The Company's residential loans represent permanent mortgage financing and are secured by residential properties located within the Bank's market areas.

Consumer installment loans and other loans include automobile loans, boat and recreational vehicle financing, and both secured and unsecured personal loans. Consumer loans carry greater risks than other loans, as the collateral can consist of rapidly depreciating assets such as automobiles and equipment that may not provide an adequate source of repayment of the loan in the case of default.

Loans are stated at unpaid balances, net of unearned income and deferred loan fees. Balances within the major loans receivable categories are presented in the following table:


	December 31,
	2011		2010
	(Dollars in Thousands)
Commercial, financial and agricultural	$	142,960	$	142,312
Real estate – construction and development		130,270		162,594
Real estate – commercial and farmland		672,765		683,974
Real estate – residential		330,727		344,830
Consumer installment		37,296		34,293
Other		18,068		6,754

		1,332,086		1,374,757
Allowance for loan losses		35,156		34,576

Loans, net	$	1,296,930	$	1,340,181

Covered loans are defined as loans that were acquired in FDIC-assisted transactions that are covered by a loss-sharing agreement with the FDIC. Covered loans totaling $571.5 million and $555.0 million at December 31, 2011 and 2010, respectively, are not included in the above schedule.

Covered loans are shown below according to loan type as of the end of the years shown:


	2011		2010
	(Dollars in Thousands)
Commercial, financial & agricultural	$	41,867	$	47,309
Real estate – construction & development		77,077		89,781
Real estate – commercial & farmland		321,257		257,428
Real estate – residential		127,644		149,226
Consumer installment loans		3,644		11,247

	$	571,489	$	554,991

Nonaccrual and Past Due Loans

A loan is placed on non-accrual status when, in management's judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged to interest income. Interest on loans that are classified as non-accrual is recognized when received. Past due loans are loans whose principal or interest is past due 90 days or more. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the original contractual terms. Non-covered loans on nonaccrual status amounted to approximately $70.8 million, $79.3 million and $96.1 million at December 31, 2011, 2010 and 2009, respectively.

The following table presents an analysis of non-covered loans accounted for on a nonaccrual basis:

		000000		000000		000000		000000		000000
	December 31,
	2011		2010		2009		2008		2007
	(Dollars in Thousands)
Commercial, financial & agricultural	$	3,987	$	8,648	$	4,774	$	4,810	$	1,736
Real estate – construction & development		15,020		7,887		15,787		10,522		3,754
Real estate – commercial & farmland		35,385		55,170		67,172		44,235		11,037
Real estate – residential		15,498		6,376		6,965		4,730		1,076
Consumer installment loans		933		1,208		1,433		1,117		865

Total	$	70,823	$	79,289	$	96,131	$	65,414	$	18,468

The following table presents an analysis of covered loans accounted for on a nonaccrual basis:

		000000		000000		000000		000000		000000
	December 31,
	2011		2010		2009		2008		2007
	(Dollars in Thousands)
Commercial, financial & agricultural	$	11,952	$	5,756	$	1,398	$	—	$	—
Real estate – construction & development		30,977		25,810		9,155		—		—
Real estate – commercial & farmland		75,458		29,519		8,109		—		—
Real estate – residential		41,139		25,946		4,602		—		—
Consumer installment loans		473		1,122		2,527		—		—

Total	$	159,999	$	88,153	$	25,791	$	—	$	—

The following table presents an analysis of non-covered past due loans as of December 31, 2011 and 2010.


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of December 31, 2011:
Commercial, financial & agricultural	$	1,103	$	705	$	3,975	$	5,783	$	137,177	$	142,960	$	—
Real estate – construction & development		2,395		1,507		13,608		17,510		112,760		130,270		—
Real estate – commercial & farmland		6,686		7,071		32,953		46,710		626,055		672,765		—
Real estate – residential		5,229		4,995		12,874		23,098		307,629		330,727		—
Consumer installment loans		963		305		725		1,993		35,303		37,296		—
Other		—		—		—		—		18,068		18,068		—

Total	$	16,376	$	14,583	$	64,135	$	95,094	$	1,236,992	$	1,332,086	$	—


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of December 31, 2010:
Commercial, financial & agricultural	$	898	$	120	$	6,746	$	7,764	$	134,548	$	142,312	$	—
Real estate – construction & development		2,121		2,039		19,458		23,618		138,976		162,594		—
Real estate – commercial & farmland		1,740		3,725		25,914		31,379		652,595		683,974		—
Real estate – residential		3,384		3,066		14,393		20,843		323,987		344,830		—
Consumer installment loans		493		142		475		1,110		33,183		34,293		3
Other		—		—		—		—		6,754		6,754		—

Total	$	8,636	$	9,092	$	66,986	$	84,714	$	1,290,043	$	1,374,757	$	3

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


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of December 30, 2011:
Commercial, financial & agricultural	$	968	$	4,297	$	11,253	$	16,518	$	25,349	$	41,867	$	—
Real estate – construction & development		2,444		1,318		27,867		31,629		45,448		77,077		—
Real estate – commercial & farmland		18,282		8,544		64,091		90,917		230,340		321,257		165
Real estate – residential		3,485		1,493		35,950		40,928		86,716		127,644		290
Consumer installment loans		127		270		440		837		2,807		3,644		—
Other		—		—		—		—		—		—		—

Total	$	25,306	$	15,922	$	139,601	$	180,829	$	390,660	$	571,489	$	455


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of December 31, 2010:
Commercial, financial & agricultural	$	2,531	$	3,954	$	4,914	$	11,399	$	35,910	$	47,309	$	3,355
Real estate – construction & development		1,464		5,254		11,866		18,584		71,197		89,781		5,038
Real estate – commercial & farmland		4,834		19,628		20,979		45,441		211,987		257,428		5,712
Real estate – residential		5,186		4,135		10,277		19,598		129,628		149,226		2,145
Consumer installment loans		606		158		1,092		1,856		9,391		11,247		133
Other		—		—		—		—		—		—		—

Total	$	14,621	$	33,129	$	49,128	$	96,878	$	458,113	$	554,991	$	16,383

Impaired Loans

Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreements. When determining if the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement, the Company considers the borrower's capacity to pay, which includes such factors as the borrower's current financial statements, an analysis of global cash flow sufficient to pay all debt obligations and an evaluation of secondary sources of repayment, such as guarantor support and collateral value. Impaired loans include loans on nonaccrual status and troubled debt restructurings. The Company individually assesses for impairment all nonaccrual loans greater than $200,000 and rated substandard or worse and all troubled debt restructurings greater than $100,000. If a loan is deemed impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan's existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis.

The following is a summary of information pertaining to non-covered impaired loans:


	As of and For the Years Ended December 31,
	2011		2010		2009
	(Dollars in Thousands)
Nonaccrual loans	$	70,823	$	79,289	$	96,131
Troubled debt restructurings not included above		17,951		21,972		20,341

Total impaired loans	$	88,774	$	101,261	$	116,472

Impaired loans not requiring a related allowance	$	—	$	—	$	—

Impaired loans requiring a related allowance	$	88,774	$	101,261	$	116,472

Allowance related to impaired loans	$	18,478	$	16,688	$	15,081

Average investment in impaired loans	$	88,320	$	103,776	$	75,784

Interest income recognized on impaired loans	$	637	$	545	$	523

Foregone interest income on impaired loans	$	613	$	3,828	$	6,253

The following table presents an analysis of information pertaining to non-covered impaired loans as of December 31, 2011 and 2010.


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of December 31, 2011:
Commercial, financial & agricultural	$	9,592	$	—	$	5,110	$	5,110	$	1,366	$	5,700
Real estate – construction & development		21,893		—		15,672		15,672		4,053		18,667
Real estate – commercial & farmland		48,688		—		45,006		45,006		8,331		42,192
Real estate – residential		25,309		—		22,053		22,053		4,499		21,081
Consumer installment loans		1,056		—		933		933		229		680

Total	$	106,538	$	—	$	88,774	$	88,774	$	18,478	$	88,320


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of December 31, 2010:
Commercial, financial & agricultural	$	9,983	$	—	$	6,985	$	6,985	$	1,649	$	6,845
Real estate – construction & development		38,060		—		23,485		23,485		4,023		35,315
Real estate – commercial & farmland		57,224		—		50,626		50,626		6,795		40,475
Real estate – residential		22,819		—		19,632		19,632		4,085		20,401
Consumer installment loans		738		—		533		533		136		740

Total	$	128,824	$	—	$	101,261	$	101,261	$	16,688	$	103,776

The following is a summary of information pertaining to covered impaired loans:


	As of and For the Years Ended December 31,
	2011		2010		2009
	(Dollars in Thousands)
Nonaccrual loans	$	159,999	$	88,153	$	25,791
Troubled debt restructurings not included above		19,884		169		—

Total impaired loans	$	179,883	$	88,322	$	25,791

Impaired loans not requiring a related allowance	$	179,883	$	88,322	$	25,791

Impaired loans requiring a related allowance	$	—	$	—	$	—

Allowance related to impaired loans	$	—	$	—	$	—

Average investment in impaired loans	$	138,950	$	44,184	$	4,395

Interest income recognized on impaired loans	$	526	$	6	$	—

Foregone interest income on impaired loans	$	202	$	1,251	$	—

The following table presents an analysis of information pertaining to covered impaired loans as of December 31, 2011 and 2010.


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of December 31, 2011:
Commercial, financial & agricultural	$	21,352	$	12,027	$	—	$	12,027	$	—	$	10,210
Real estate – construction & development		47,005		34,363		—		34,363		—		30,610
Real estate – commercial & farmland		106,953		84,740		—		84,740		—		56,607
Real estate – residential		68,411		48,280		—		48,280		—		40,675
Consumer installment loans		623		473		—		473		—		848

Total	$	244,344	$	179,883	$	—	$	179,883	$	—	$	138,950


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of December 31, 2010:
Commercial, financial & agricultural	$	10,974	$	5,756	$	—	$	5,756	$	—	$	2,025
Real estate – construction & development		64,904		25,810		—		25,810		—		12,071
Real estate – commercial & farmland		49,381		29,519		—		29,519		—		17,717
Real estate – residential		48,148		26,115		—		26,115		—		11,579
Consumer installment loans		1,268		1,122		—		1,122		—		792

Total	$	174,675	$	88,322	$	—	$	88,322	$	—	$	44,184

Credit Quality Indicators

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. Following is a description of the general characteristics of the grades:

Grade 10 – Prime Credit – This grade represents loans to the Company's most creditworthy borrowers or loans that are secured by cash or cash equivalents.

Grade 15 – Good Credit – This grade includes loans that exhibit one or more characteristics better than that of a Satisfactory Credit. Generally, debt service coverage and borrower's liquidity is materially better than required by the Company's loan policy.

Grade 20 – Satisfactory Credit – This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate ability to repay.

Grade 23 – Performing, Under-Collateralized Credit – This grade is assigned to loans that are currently performing and supported by adequate financial information that reflects repayment capacity, but exhibits a loan-to-value ratio greater than 110%, based on a documented collateral valuation.

Grade 25 – Minimum Acceptable Credit – This grade includes loans which exhibit all the characteristics of a Satisfactory Credit, but warrant more than normal level of banker supervision due to (i) circumstances which elevate the risks of performance (such as start-up operations, untested management, heavy leverage, interim losses); (ii) adverse, extraordinary events that have affected, or could affect, the borrower's cash flow, financial condition, ability to continue operating profitability or refinancing (such as death of principal, fire, divorce); (iii) loans that require more than the normal servicing requirements (such as any type of construction financing, acquisition and development loans, accounts receivable or inventory loans and floor plan loans); (iv) existing technical exceptions which raise some doubts about the Bank's perfection in its collateral position or the continued financial capacity of the borrower; or (v) improvements in formerly criticized borrowers, which may warrant banker supervision.

Grade 30 – Other Asset Especially Mentioned – This grade includes loans that exhibit potential weaknesses that deserve management's close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Company's credit position at some future date.

Grade 40 – Substandard – This grade represents loans which are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses or questionable collateral values.

Grade 50 – Doubtful – This grade includes loans which exhibit all of the characteristics of a substandard loan with the added provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or improbable.

Grade 60 – Loss – This grade is assigned to loans which are considered uncollectible and of such little value that their continuance as active assets of the Bank is not warranted. This classification does not mean that the loss has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing it off.

The following table presents the non-covered loan portfolio by risk grade as of December 31, 2011 and 2010.

As of December 31, 2011:


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	17,213	$	20	$	235	$	252	$	6,210	$	—	$	23,930
15		15,379		5,391		151,068		88,586		1,065		—		261,489
20		60,631		32,654		272,241		80,989		20,781		18,068		485,364
23		32		7,994		10,679		10,997		28		—		29,730
25		42,815		62,029		163,554		110,786		7,181		—		386,365
30		2,509		2,027		21,490		15,001		557		—		41,584
40		4,258		19,864		53,498		23,867		1,460		—		102,947
50		123		291		—		249		14		—		677
60		—		—		—		—		—		—		—

Total	$	142,960	$	130,270	$	672,765	$	330,727	$	37,296	$	18,068	$	1,332,086

As of December 31, 2010:


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	17,739	$	211	$	1,109	$	110	$	5,507	$	—	$	24,676
15		11,191		3,006		145,376		40,783		858		—		201,214
20		48,738		39,407		274,817		118,179		18,566		6,754		506,461
23		2,246		7,696		9,159		6,197		31		—		25,329
25		53,957		73,589		168,273		137,416		8,261		—		441,496
30		998		6,437		29,029		17,069		273		—		53,806
40		6,633		32,009		56,090		25,076		791		—		120,599
50		810		239		120		—		6		—		1,175
60		—		—		1		—		—		—		1

Total	$	142,312	$	162,594	$	683,974	$	344,830	$	34,293	$	6,754	$	1,374,757

The following table presents the covered loan portfolio by risk grade as of December 31, 2011 and 2010.

As of December 31, 2011:


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	442	$	—	$	—	$	1,329	$	768	$	—	$	2,539
15		29		52		1,755		586		14		—		2,436
20		4,807		5,751		26,211		19,216		687		—		56,672
23		—		1,177		3,262		1,038		—		—		5,477
25		15,531		21,142		137,981		43,606		1,308		—		219,568
30		5,882		10,654		49,642		12,374		172		—		78,724
40		15,176		38,273		102,406		49,495		695		—		206,045
50		—		28		—		—		—		—		28
60		—		—		—		—		—		—		—

Total	$	41,867	$	77,077	$	321,257	$	127,644	$	3,644	$	—	$	571,489

As of December 31, 2010:


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	1,297	$	—	$	—	$	—	$	1,241	$	—	$	2,538
15		124		—		—		—		35		—		159
20		957		4,245		15,961		5,861		1,865		—		28,889
23		—		—		—		—		—		—		—
25		30,333		28,918		130,540		78,665		6,231		—		274,687
30		3,099		7,690		38,275		22,385		396		—		71,845
40		11,495		48,928		72,652		42,233		1,479		—		176,787
50		4		—		—		82		—		—		86
60		—		—		—		—		—		—		—

Total	$	47,309	$	89,781	$	257,428	$	149,226	$	11,247	$	—	$	554,991

Troubled Debt Restructurings

The restructuring of a loan is considered a "troubled debt restructuring" if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. The Company has exhibited the greatest success for rehabilitation of the loan by a reduction in the rate alone (maintaining the amortization of the debt) or a combination of a rate reduction and the forbearance of previously past due interest or principal. This has most typically been evidenced in certain commercial real estate loans whereby a disruption in the borrower's cash flow resulted in an extended past due status, of which the borrower was unable to catch up completely as the cash flow of the property ultimately stabilized at a level lower than its original level. A reduction in rate, coupled with a forbearance of unpaid principal and/or interest, allowed the net cash flows to service the debt under the modified terms.

The Company's policy requires a restructure request to be supported by a current, well-documented credit evaluation of the borrower's financial condition and a collateral evaluation that is no older than six months from the date of the restructure. Key factors of that evaluation include the documentation of current, recurring cash flows, support provided by the guarantor(s) and the current valuation of the collateral. If the appraisal in file is older than six months, an evaluation must be made as to the continued reasonableness of the valuation. For certain income-producing properties, current rent rolls and/or other income information can be utilized to support the appraisal valuation, when coupled with documented cap rates within our markets and a physical inspection of the collateral to validate the current condition.

The Company's policy states in the event a loan has been identified as a troubled debt restructuring, it should be assigned a grade of substandard and placed on nonaccrual status until such time that the borrower has demonstrated the ability to service the loan payments based on the restructured terms – generally defined as six months of satisfactory payment history. Missed payments under the original loan terms are not considered under the new structure; however, subsequent missed payments are considered non-performance and are not considered toward the six month required term of satisfactory payment history. The Company's loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest, or (ii) when it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower's financial condition and the prospects for full repayment, approved by the Company's Senior Credit Officer.

In the normal course of business, the Company renews loans with a modification of the interest rate or terms that are not deemed as troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modified loans in 2011 and 2010 totaling $37.2 million and $23.8 million, respectively, under such parameters. In addition, the Company offers consumer loan customers an annual skip-a-pay program that is based on certain qualifying parameters and not based on financial difficulties. The Company does not treat these as troubled debt restructurings.

The following table presents the amount of troubled debt restructurings by loan class, classified separately as accrual and non-accrual at December 31, 2011 and 2010.


As of December 31, 2011	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance (in thousands)		#		Balance (in thousands)
Real estate – construction & development		6	$	1,774		5	$	2,122
Real estate – commercial & farmland		14		9,622		2		4,737
Real estate – residential		19		6,555		4		1,296

Total		39	$	17,951		11	$	8,155


As of December 31, 2010	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance (in thousands)		#		Balance (in thousands)
Real estate – construction & development		2		786		2		2,290
Real estate – commercial & farmland		15		19,262		3		2,864
Real estate – residential		9		1,924		1		316

Total		26	$	21,972		6	$	5,470

The following table presents the amount of troubled debt restructurings by loan class, classified separately as those currently paying under restructured terms and those that have defaulted under restructured terms at December 31, 2011 and 2010.


As of December 3 1 , 2011	Loans Currently Paying Under Restructured Terms				Loans that have Defaulted Under Restructured Terms
Loan class:	#		Balance (in thousands)		#		Balance (in thousands)
Real estate – construction & development		7	$	2,897		4	$	999
Real estate – commercial & farmland		15		11,695		1		2,664
Real estate – residential		20		6,862		3		989

Total		42	$	21,454		8	$	4,652


As of December 3 1 , 201 0	Loans Currently Paying Under Restructured Terms				Loans that have Defaulted Under Restructured Terms
Loan class:	#		Balance (in thousands)		#		Balance (in thousands)
Real estate – construction & development		4		3,076		—		—
Real estate – commercial & farmland		17		21,720		1		406
Real estate – residential		10		2,240		—		—

Total		31	$	27,036		1	$	406

The following table presents the amount of troubled debt restructurings by types of concessions made, classified separately as accrual and non-accrual at December 31, 2011 and 2010.


As of December 31, 2011	Accruing Loans				Non-Accruing Loans
Type of Concession:	#		Balance (in thousands)		#		Balance (in thousands)
Forbearance of Interest		1	$	311		—	$	—
Forgiveness of Principal		2		902		1		136
Payment Modification Only		1		92		1		307
Rate Reduction Only		7		4,192		4		1,145
Rate Reduction, Forbearance of Interest		14		9,347		—		—
Rate Reduction, Forbearance of Principal		14		3,107		1		1,123
Rate Reduction, Payment Modification		—		—		4		5,444

Total		39	$	17,951		11	$	8,155


As of December 31, 2010	Accruing Loans				Non-Accruing Loans
Type of Concession:	#		Balance (in thousands)		#		Balance (in thousands)
Forbearance of Interest		—	$	—		2	$	722
Forgiveness of Principal		4		1,145		—		—
Payment Modification Only		3		232		—		—
Rate Reduction Only		5		5,985		—		—
Rate Reduction, Forbearance of Interest		7		6,207		1		1,615
Rate Reduction, Forbearance of Principal		1		596		—		—
Rate Reduction, Payment Modification		6		7,807		3		3,133

Total		26	$	21,972		6	$	5,470


The following table presents the amount of troubled debt restructurings by collateral types, classified separately as accrual and non-accrual at December 31, 2011 and 2010.

As of December 31, 2011	Accruing Loans				Non-Accruing Loans
Collateral type:	#		Balance (in thousands)		#		Balance (in thousands)
Warehouse		1	$	1,347		—	$	—
Raw Land		3		1,549		2		618
Hotel & Motel		1		503		1		2,072
Office		3		1,077		—		—
Retail, including Strip Centers		9		6,694		1		2,665
1-4 Family Residential		22		6,781		7		2,800

Total		39	$	17,951		11	$	8,155


As of December 31, 2010	Accruing Loans				Non-Accruing Loans
Collateral type:	#		Balance (in thousands)		#		Balance (in thousands)
Apartments		3	$	3,770		—	$	—
Raw Land		6		2,429		2		2,290
Hotel & Motel		2		4,199		1		2,072
Office		—		—		2		792
Retail, including Strip Centers		6		9,650		—		—
1-4 Family Residential		9		1,924		1		316

Total		26	$	21,972		6	$	5,470

As of December 31, 2011 and 2010, the Company had a balance of $26.1 million and $27.4 million, respectively, in troubled debt restructurings. The Company has recorded $1.7 million and $2.6 million in previous charge-offs on such loans at December 31, 2011 and 2010, respectively. The Company's balance in the allowance for loan losses allocated to such troubled debt restructurings was $2.7 million and $3.3 million at December 31, 2011 and 2010, respectively.

Allowance for Loan Losses

The allowance for loan losses represents a reserve for inherent losses in the loan portfolio. The adequacy of the allowance for loan losses is evaluated periodically based on a review of all significant loans, with a particular emphasis on non-accruing, past due and other loans that management believes might be potentially impaired or warrant additional attention. The Company segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio. In addition, based on internal reviews and external reviews performed by independent loan reviewers and regulatory authorities, the Company further segregates the loan portfolio by loan grades based on an assessment of risk for a particular loan or group of loans. Certain reviewed loans are assigned specific allowances when a review of relevant data determines that a general allocation is not sufficient. In establishing allowances, management considers historical loan loss experience but adjusts this data with a significant emphasis on data such as risk ratings, current loan quality trends, current economic conditions and other factors in the markets where the Company operates. Factors considered include, among others, current valuations of real estate in their markets, unemployment rates, the effect of weather conditions on agricultural related entities and other significant local economic events.

The Company has developed a methodology for determining the adequacy of the allowance for loan losses which is monitored by the Company's Senior Credit Officer. Procedures provide for the assignment of a risk rating for every loan included in the total loan portfolio, with the exception of credit card receivables and overdraft protection loans which are treated as pools for risk rating purposes. The risk rating schedule provides nine ratings of which five ratings are classified as pass ratings and four ratings are classified as criticized ratings. Each risk rating is assigned a percentage factor of historical losses to be applied to the loan balance to determine the adequate amount of reserve. Many of the larger loans require an annual review by an independent loan officer or an independent third party loan review firm. As a result of these loan reviews, certain loans may be assigned specific reserve allocations. Other loans that surface as problem loans may also be assigned specific reserves. Past due loans are assigned risk ratings based on the number of days past due. The calculation of the allowance for loan losses, including underlying data and assumptions, is reviewed regularly by the Company's Chief Financial Officer and the Director of Internal Audit.

Loan losses are charged against the allowance when management believes the collection of a loan's principal is unlikely. Subsequent recoveries are credited to the allowance. Consumer loans are charged-off in accordance with the Federal Financial Institutions Examination Council's ("FFIEC") Uniform Retail Credit Classification and Account Management Policy. Commercial loans are charged-off when they are deemed uncollectible, which usually involves a triggering event within the collection effort. If the loan is collateral dependent, the loss is more easily identified and is charged-off when it is identified, usually based upon receipt of an appraisal. However, when a loan has guarantor support, the Company may carry the estimated loss as a reserve against the loan while collection efforts with the guarantor are pursued. If, after collection efforts with the guarantor are complete, the deficiency is still considered uncollectible, the loss is charged-off and any further collections are treated as recoveries. In all situations, when a loan is downgraded to an Asset Quality Rating of 60 (Loss per the regulatory guidance), the uncollectible portion is charged-off.

Changes in the allowance for loan losses for the years ended December 31, 2011, 2010 and 2009 are as follows:


	December 31,
	2011			2010			2009
	(Dollars in Thousands)
Balance, beginning of year	$	34,576		$	35,762		$	39,652
Provision for non-covered loan losses		30,341			48,839			42,068
Loans charged off		(31,623	)		(52,623	)		(47,129	)
Recoveries of loans previously charged off		1,862			2,598			1,171

Balance, end of year	$	35,156		$	34,576		$	35,762

During 2011 and 2010, the Company recorded provision for loan loss expense of $2.4 million and $1.7 million, respectively, to account for losses where the initial estimate of cash flows was found to be excessive on loans acquired in FDIC-assisted transactions. These amounts are excluded from the rollforwards above and below but are reflected in the Company's Consolidated Statements of Operations.

The following table details activity in the allowance for loan losses by non-covered portfolio segment for the years ended December 31, 2011 and 2010. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.


	Commercial, financial & agricultural			Real estate - construction & development			Real estate - commercial & farmland			Real estate - residential			Consumer installment loans and Other			Total
	(Dollars in thousands)
Balance, January 1, 2011	$	2,779		$	7,705		$	14,971		$	8,664		$	457		$	34,576
Provision for loan losses		5,772			11,354			7,883			4,717			615			30,341
Loans charged off		(5,807	)		(10,988	)		(8,680	)		(5,399	)		(749	)		(31,623	)
Recoveries of loans previously charged off		174			1,367			52			146			123			1,862

Balance, December 31, 2011	$	2,918		$	9,438		$	14,226		$	8,128		$	446		$	35,156

Period-end amount allocated to:
Loans individually evaluated for impairment	$	766		$	3,478		$	8,152		$	3,567		$	3		$	15,966
Loans collectively evaluated for impairment		2,152			5,960			6,074			4,561			443			19,190

Ending balance	$	2,918		$	9,438		$	14,226		$	8,128		$	446		$	35,156

Loans:
Individually evaluated for impairment	$	2,831		$	13,561		$	45,084		$	16,080		$	17		$	77,573
Collectively evaluated for impairment		140,129			116,709			627,681			314,647			55,347			1,254,513

Ending balance	$	142,960		$	130,270		$	672,765		$	330,727		$	55,364		$	1,332,086


	Commercial, financial & agricultural			Real estate - construction & development			Real estate - commercial & farmland			Real estate - residential			Consumer installment loans and Other			Total
	(Dollars in thousands)
Balance, January 1, 2010	$	3,428		$	13,098		$	11,296		$	7,391		$	549		$	35,762
Provision for loan losses		4,265			13,776			18,937			11,178			683			48,839
Loans charged off		(5,481	)		(19,853	)		(16,108	)		(10,091	)		(1,090	)		(52,623	)
Recoveries of loans previously charged off		567			684			846			186			315			2,598

Balance, December 31, 2010	$	2,779		$	7,705		$	14,971		$	8,664		$	457		$	34,576

Period-end amount allocated to:
Loans individually evaluated for impairment	$	677		$	3,554		$	6,300		$	2,554		$	—		$	13,085
Loans collectively evaluated for impairment		2,102			4,151			8,671			6,110			457			21,491

Ending balance	$	2,779		$	7,705		$	14,971		$	8,664		$	457		$	34,576

Loans:
Individually evaluated for impairment	$	3,930		$	22,838		$	50,179		$	14,740		$	—		$	91,687
Collectively evaluated for impairment		138,382			139,756			633,795			330,090			41,047			1,283,070

Ending balance	$	142,312		$	162,594		$	683,974		$	344,830		$	41,047		$	1,374,757

Related Party Loans

In the ordinary course of business, the Company has granted loans to certain directors and their affiliates. The interest rates on these loans were substantially the same as rates prevailing at the time of the transaction and repayment terms are customary for the type of loan. Company policy prohibits loans to executive officers. Changes in related party loans are summarized as follows:


	December 31,
	2011			2010
	(Dollars in Thousands)
Balance, beginning of year	$	7,618		$	8,336
Advances		5,374			782
Repayments		(6,070	)		(1,500	)

Balance, end of year	$	6,922		$	7,618