NOTE 7. ALLOWANCE FOR LOAN LOSSES

An analysis of the allowance for loan losses for the six month periods ended June 30, 2012 and 2011, and for the year ended December 31, 2011 is as follows:


		Six Months Ended				Year Ended
		June 30,				December 31,
Dollars in thousands		2012		2011		2011

Balance, beginning of year	$	17,712	$	17,224	$	17,224
Losses:
Commercial		126		93		506
Commercial real estate
Owner occupied		636		152		508
Non-owner occupied		457		61		78
Construction and development
Land and land development		1,715		1,875		3,568
Construction		368		-		-
Residential real estate
Non-jumbo		480		2,000		3,178
Jumbo		237		1,098		1,511
Home equity		4		-		346
Consumer		65		82		162
Other		41		57		86
Total		4,129		5,418		9,943
Recoveries:
Commercial		4		32		35
Commercial real estate
Owner occupied		24		36		37
Non-owner occupied		13		21		55
Construction and development
Land and land development		14		4		43
Construction		-		-		-
Real estate - mortgage
Non-jumbo		32		27		83
Jumbo		84		1		14
Home equity		60		1		1
Consumer		34		41		112
Other		40		47		51
Total		305		210		431
Net losses		3,824		5,208		9,512
Provision for loan losses		4,002		6,000		10,000
Balance, end of year	$	17,890	$	18,016	$	17,712

Activity in the allowance for loan losses by loan class during the first six months of 2012 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	$	7,262	$	120	$	771	$	1,336		$	3,283	$	2,586	$	1,331		$	831		$	160	$	32		$	17,712
Charge-offs		1,715		368		126		636			457		480		237			4			65		41			4,129
Recoveries		14		-		4		24			13		32		84			60			34		40			305
Provision		321		339		123		347			275		1,227		1,403			(33	)		5		(5	)		4,002
Ending balance	$	5,882	$	91	$	772	$	1,071		$	3,114	$	3,365	$	2,581		$	854		$	134	$	26		$	17,890

Allowance related to:
Loans individually
evaluated for impairment	$	3,029	$	-	$	255	$	53		$	306	$	1,094	$	1,634		$	147		$	4	$	-		$	6,522
Loans collectively
evaluated for impairment		2,853		91		517		1,018			2,808		2,271		947			707			130		26			11,368
Loans acquired with
deteriorated credit quality		-		-		-		-			-		-		-			-			-		-			-
Total	$	5,882	$	91	$	772	$	1,071		$	3,114	$	3,365	$	2,581		$	854		$	134	$	26		$	17,890

Loans
Loans individually
evaluated for impairment	$	33,816	$	-	$	6,895	$	16,008		$	9,987	$	7,240	$	23,653		$	360		$	45	$	-		$	98,004
Loans collectively
evaluated for impairment		50,567		1,793		85,165		136,339			270,904		210,081		38,308			51,333			21,167		2,523		$	868,180
Loans acquired with
deteriorated credit quality		-		-		-		-			-		-		-			-			-		-			-
Total	$	84,383	$	1,793	$	92,060	$	152,347	$		280,891	$	217,321	$	61,961	$		51,693		$	21,212	$	2,523		$	966,184