NOTE 7. ALLOWANCE FOR LOAN LOSSES

An analysis of the allowance for loan losses for the six month periods ended June 30, 2011 and 2010, and for the year ended December 31, 2010 is as follows:

	Six Months Ended				Year Ended
	June 30,				December 31,
Dollars in thousands	2011		2010		2010
Balance, beginning of period	$	17,224	$	17,000	$	17,000
Losses:
Commercial		93		103		601
Commercial real estate		213		4,524		9,239
Construction and development		1,875		3,812		7,937
Residential real estate		3,098		1,797		3,836
Consumer		82		193		279
Other		57		84		233
Total		5,418		10,513		22,125
Recoveries:
Commercial		32		16		38
Commercial real estate		57		5		273
Construction and development		4		184		331
Residential real estate		29		115		164
Consumer		41		46		87
Other		47		65		106
Total		210		431		999
Net losses		5,208		10,082		21,126
Provision for loan losses		6,000		13,850		21,350
Balance, end of period	$	18,016	$	20,768	$	17,224

Activity in the allowance for loan losses by loan class during the first six months of 2011 is as follows:


	Construction & Land Development
	Land &								Commercial Real Estate					Residential Real Estate
	Land										Non-
	Devlop-			Construc-			Commer-		Owner		Owner			Non-				Home		Con-
Dollars in thousands	ment			tion			cial		Occupied		Occupied			jumbo		Jumbo		Equity		sumer		Other		Total

Allowance for loan losses
Beginning balance	$	5,903		$	448		$	392	$	1,306	$	3,199		$	3,195	$	1,468	$	786	$	201	$	35	$	16,933
Charge-offs		47			-			93		153		61			1,140		455		-		45		28		2,022
Recoveries		2			-			3		36		13			17		-		-		16		18		105
Provision		(56	)		(27	)		504		694		(67	)		1,216		599		87		47		3		3,000
Ending balance	$	5,802		$	421		$	806	$	1,883	$	3,084		$	3,288	$	1,612	$	873	$	219	$	28	$	18,016

Allowance related to:
Loans individually
evaluated for impairment	$	1,104		$	-		$	423	$	844	$	683		$	691	$	542	$	325	$	12	$	-	$	4,624
Loans collectively
evaluated for impairment		4,698			421			383		1,039		2,401			2,597		1,070		548		207		28		13,392
Loans acquired with
deteriorated credit quality		-			-			-		-		-			-		-		-		-		-		-
Total	$	5,802		$	421		$	806	$	1,883	$	3,084		$	3,288	$	1,612	$	873	$	219	$	28	$	18,016

Loans
Loans individually
evaluated for impairment	$	26,982		$	-		$	1,638	$	13,701	$	13,252		$	7,704	$	15,974	$	541	$	38	$	-	$	79,830
Loans collectively
evaluated for impairment		67,482			12,223			90,649		167,242		229,179			220,501		44,843		50,343		23,735		3,116	$	909,313
Loans acquired with
deteriorated credit quality		-			-			-		-		-			-		-		-		-		-		-
Total	$	94,464		$	12,223		$	92,287	$	180,943	$	242,431		$	228,205	$	60,817	$	50,884	$	23,773	$	3,116	$	989,143