NOTE 7. ALLOWANCE FOR LOAN LOSSES

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


		Nine Months Ended				Year Ended
		September 30,				December 31,
Dollars in thousands		2012		2011		2011

Balance, beginning of year	$	17,712	$	17,224	$	17,224
Losses:
Commercial		355		500		506
Commercial real estate
Owner occupied		636		501		508
Non-owner occupied		436		76		78
Construction and development
Land and land development		2,319		2,446		3,568
Construction		367		-		-
Residential real estate
Non-jumbo		1,257		2,524		3,178
Jumbo		737		1,098		1,511
Home equity		5		234		346
Consumer		91		113		162
Other		69		82		86
Total		6,272		7,574		9,943
Recoveries:
Commercial		7		34		35
Commercial real estate
Owner occupied		24		37		37
Non-owner occupied		20		31		55
Construction and development
Land and land development		16		8		43
Construction		-		-		-
Real estate - mortgage
Non-jumbo		51		46		83
Jumbo		85		6		14
Home equity		60		1		1
Consumer		53		72		112
Other		62		63		51
Total		378		298		431
Net losses		5,894		7,276		9,512
Provision for loan losses		6,002		8,001		10,000
Balance, end of year	$	17,820	$	17,949	$	17,712

Activity in the allowance for loan losses by loan class during the first nine 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		2,319		367		355		636			436		1,257		737			5			91		69			6,272
Recoveries		16		-		7		24			20		51		85			60			53		62			378
Provision		302		354		52		401			343		1,308		3,618			(366	)		-		(10	)		6,002
Ending balance	$	5,261	$	107	$	475	$	1,125		$	3,210	$	2,688	$	4,297		$	520		$	122	$	15		$	17,820

Allowance related to:
Loans individually
evaluated for impairment	$	2,762	$	-	$	86	$	241		$	475	$	502	$	3,211		$	28		$	4	$	-		$	7,309
Loans collectively
evaluated for impairment		2,499		107		389		884			2,735		2,186		1,086			492			118		15			10,511
Loans acquired with
deteriorated credit quality		-		-		-		-			-		-		-			-			-		-			-
Total	$	5,261	$	107	$	475	$	1,125		$	3,210	$	2,688	$	4,297		$	520		$	122	$	15		$	17,820

Loans
Loans individually
evaluated for impairment	$	31,138	$	-	$	12,411	$	15,946		$	12,057	$	6,420	$	23,094		$	220		$	43	$	-		$	101,329
Loans collectively
evaluated for impairment		51,719		2,087		76,586		134,144			267,075		209,164		39,654			53,235			21,247		2,513		$	857,424
Loans acquired with
deteriorated credit quality		-		-		-		-			-		-		-			-			-		-			-
Total	$	82,857	$	2,087	$	88,997	$	150,090	$		279,132	$	215,584	$	62,748	$		53,455		$	21,290	$	2,513		$	958,753