Major classifications of loans at June 30, 2011 and December 31, 2010 are summarized as follows:

	2011		2010
Commercial, secured by real estate	$	318,666	$	319,048
Commercial, other		79,421		82,591
Real estate construction		35,218		48,213
Residential real estate, including home equity		228,735		233,513
Agricultural		2,553		2,564
Consumer		31,321		32,926
Other		8,108		7,109
	$	704,022	$	725,964

Activity in the allowance for loan losses by portfolio segment for the six months ending June 30, 2011 was as follows:

Loan Class	Balance Dec 31, 2010		Provision for loan losses			Loans charged-off		Recoveries		Balance June 30, 2011

Residential real estate	$	2,666	$	152		$	168	$	16	$	2,666
Multifamily real estate		252		95			-		2		349
Commercial real estate:
Owner occupied		1,141		(155	)		-		2		988
Non owner occupied		1,644		253			261		3		1,639
Commercial and industrial		2,421		2,218			16		8		4,631
Consumer		366		18			60		40		364
All other		1,375		(241	)		73		50		1,111
Total	$	9,865	$	2,340		$	578	$	121	$	11,748

Activity in the allowance for loan losses by portfolio segment for the three months ending June 30, 2011 was as follows:

Loan Class	Balance March 31, 2011		Provision for loan losses			Loans charged-off		Recoveries		Balance June 30, 2011

Residential real estate	$	2,760	$	(16	)	$	88	$	10	$	2,666
Multifamily real estate		303		44			-		2		349
Commercial real estate:
Owner occupied		1,258		(270	)		-		-		988
Non owner occupied		1,896		(14	)		245		2		1,639
Commercial and industrial		2,262		2,369			-		-		4,631
Consumer		386		(5	)		32		15		364
All other		1,417		(288	)		33		15		1,111
Total	$	10,282	$	1,820		$	398	$	44	$	11,748

Changes in the allowance for loan losses for the three and six months ended June 30, 2010 are as follows:

	Three Months Ended June 30,			Six Months Ended June 30,
	2010			2010
Balance, beginning of period	$	8,068		$	7,569
Gross charge-offs		(378	)		(583	)
Recoveries		102			235
Provision for loan losses		1,409			1,980
Balance, end of period	$	9,201		$	9,201

The following table sets forth information with respect to the Company's nonperforming loans at June 30, 2011 and December 31, 2010.

	2011		2010
Non-accrual loans	$	51,387	$	47,131
Accruing loans which are contractually past due 90 days or more		308		414
Restructured loans		350		2,639
Total	$	52,045	$	50,184

The following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of June 30, 2011 and December 31, 2010. The recorded investment in non-accrual loans is less than the principal owed on non-accrual loans due to discounts applied to the carrying value of the loan at time of their acquisition and interest payments made by the borrower which have been used to reduce the recorded investment in the loan rather than recognized as interest income.

June 30, 2011	Principal Owed on Non-accrual Loans		Recorded Investment in Non-accrual Loans		Loans Past Due Over 90 Days, still accruing

Residential real estate	$	4,896	$	3,768	$	195
Multifamily real estate		10,788		8,598		-
Commercial real estate
Owner occupied		13,158		11,143		-
Non owner occupied		9,841		7,710		-
Commercial and industrial		10,452		8,234		76
Consumer		82		80		13
All other		15,961		11,854		24
Total	$	65,178	$	51,387	$	308

December 31, 2010	Principal Owed on Non-accrual Loans		Recorded Investment in Non-accrual Loans		Loans Past Due Over 90 Days, still accruing

Residential real estate	$	4,845	$	3,764	$	80
Multifamily real estate		6,764		4,742		-
Commercial real estate
Owner occupied		12,680		10,493		-
Non owner occupied		14,624		12,081		-
Commercial and industrial		7,939		5,813		319
Consumer		15		15		15
All other		14,805		10,223		-
Total	$	61,672	$	47,131	$	414

Nonaccrual loans and impaired loans are defined differently. Some loans may be included in both categories, and some may only be included in one category. Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the aging of the recorded investment in past due loans as of June 30, 2011 by class of loans:

Loan Class	Total Loans		30-89 Days Past Due		Greater than 90 days past due		Total Past Due		Loans Not Past Due

Residential real estate	$	228,735	$	3,832	$	2,551	$	6,383	$	222,352
Multifamily real estate		37,443		1,434		5,617		7,051		30,392
Commercial real estate:
Owner occupied		107,535		2,410		5,768		8,178		99,357
Non owner occupied		159,244		1,285		3,785		5,070		154,174
Commercial and industrial		79,421		400		7,563		7,963		71,458
Consumer		31,321		428		72		500		30,821
All other		60,323		2,269		11,851		14,120		46,203
Total	$	704,022	$	12,058	$	37,207	$	49,265	$	654,757

The following table presents the aging of the recorded investment in past due loans as of December 31, 2010 by class of loans:

Loan Class	Total Loans		30-89 Days Past Due		Greater than 90 days past due		Total Past Due		Loans Not Past Due

Residential real estate	$	233,513	$	5,902	$	2,266	$	8,168	$	225,345
Multifamily real estate		41,037		4,471		2,140		6,611		34,426
Commercial real estate:
Owner occupied		106,924		5,638		5,797		11,435		95,489
Non owner occupied		155,839		1,141		6,907		8,048		147,791
Commercial and industrial		82,591		1,216		5,965		7,181		75,410
Consumer		32,926		395		29		424		32,502
All other		73,134		4,852		10,203		15,055		58,079
Total	$	725,964	$	23,615	$	33,307	$	56,922	$	669,042

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2011:

	Allowance for Loan Losses						Loan Balances
Loan Class	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total

Residential real estate	$	119	$	2,547	$	2,666	$	319	$	228,416	$	228,735
Multifamily real estate		2		347		349		7,804		29,639		37,443
Commercial real estate:
Owner occupied		216		772		988		12,268		95,267		107,535
Non-owner occupied		386		1,253		1,639		8,030		151,214		159,244
Commercial and industrial		3,741		890		4,631		8,564		70,857		79,421
Consumer		22		342		364		41		31,280		31,321
All other		378		733		1,111		13,107		47,216		60,323
Total	$	4,864	$	6,884	$	11,748	$	50,133	$	653,889	$	704,022

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2010:

	Allowance for Loan Losses						Loan Balances
Loan Class	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total

Residential real estate	$	48	$	2,618	$	2,666	$	207	$	233,306	$	233,513
Multifamily real estate		-		252		252		4,742		36,295		41,037
Commercial real estate:
Owner occupied		280		861		1,141		11,892		95,032		106,924
Non-owner occupied		619		1,025		1,644		12,220		143,619		155,839
Commercial and industrial		1,389		1,032		2,421		8,544		74,047		82,591
Consumer		23		343		366		43		32,883		32,926
All other		163		1,212		1,375		11,452		61,682		73,134
Total	$	2,522	$	7,343	$	9,865	$	49,100	$	676,864	$	725,964

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the six months ended June 30, 2011:

	Six months ended June 30, 2011
Loan Class	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized

Residential real estate	$	281	$	84	$	93
Multifamily real estate		6,748		16		16
Commercial real estate:
Owner occupied		11,949		25		26
Non-owner occupied		10,147		30		32
Commercial and industrial		8,441		189		192
Consumer		41		4		4
All other		12,865		25		25
Total	$	50,472	$	373	$	388

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the three months ended June 30, 2011:

	Three months ended June 30, 2011
Loan Class	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized

Residential real estate	$	319	$	82	$	91
Multifamily real estate		7,751		16		16
Commercial real estate:
Owner occupied		11,977		12		12
Non-owner occupied		9,111		23		24
Commercial and industrial		8,390		16		18
Consumer		40		3		3
All other		13,571		19		17
Total	$	51,159	$	171	$	181

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2011:

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential real estate	$	-	$	-	$	-
Multifamily real estate		9,802		7,722		-
Commercial real estate
Owner occupied		11,514		9,541		-
Non owner occupied		8,329		6,559		-
Commercial and industrial		4,625		3,256		-
All other		12,304		8,202		-
		46,574		35,280		-
With an allowance recorded:
Residential real estate	$	319	$	319	$	119
Multifamily real estate		82		82		2
Commercial real estate
Owner occupied		2,769		2,727		216
Non owner occupied		1,821		1,470		386
Commercial and industrial		6,565		5,308		3,741
Consumer		41		41		22
All other		4,908		4,906		378
		16,505		14,853		4,864
Total	$	63,079	$	50,133	$	4,864

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2010:

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential real estate	$	207	$	10	$	-
Multifamily real estate		6,764		4,742		-
Commercial real estate
Owner occupied		10,437		8,720
Non owner occupied		6,338		5,105		-
Commercial and industrial		5,043		3,837		-
All other		13,868		9,289		-
		42,657		31,703		-
With an allowance recorded:
Residential real estate	$	197	$	197	$	48
Commercial real estate
Owner occupied		3,596		3,172		280
Non owner occupied		8,484		7,115		619
Commercial and industrial		5,891		4,707		1,389
Consumer		43		43		23
All other		2,165		2,163		163
		20,376		17,397		2,522
Total	$	63,033	$	49,100	$	2,522

Troubled Debt Restructurings

A loan is classified as a troubled debt restructuring ("TDR") when a concession is granted to the borrower that would not have otherwise been considered due to a borrower's financial difficulties. Most of the Company's TDRs involve a restructuring of loan terms to reduce the payment amount and/or to require only interest for a period prior to maturity. The following table presents TDR's as of June 30, 2011 and December 31, 2010:

June 30, 2011	TDR's on Non-accrual		Other TDR's		Total TDR's

Residential real estate	$	59	$	354	$	413
Non owner occupied		-		98		98
Commercial and industrial		-		4		4
Consumer		17		5		22
Total	$	76	$	461	$	537

December 31, 2010	TDR's on Non-accrual		Other TDR's		Total TDR's

Residential real estate	$	-	$	1,078	$	1,078
Multifamily real estate		-		-		-
Commercial real estate
Owner occupied		-		365		365
Non owner occupied		-		511		511
Commercial and industrial		-		292		292
Consumer		-		3		3
All other		-		390		390
Total	$	-	$	2,639	$	2,639

At June 30, 2011, $15,000 in specific reserves was allocated to loans that had restructured terms. At December 31, 2010, $5,000 in specific reserves was allocated to loans that had restructured terms.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a monthly basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

As of June 30, 2011, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Loan Class	Pass		Special Mention		Substandard		Doubtful		Total Loans

Residential real estate	$	206,445	$	10,007	$	11,964	$	319	$	228,735
Multifamily real estate		21,376		6,489		9,578		-		37,443
Commercial real estate:
Owner occupied		81,722		7,420		18,002		391		107,535
Non-owner occupied		140,765		4,852		13,627		-		159,244
Commercial and industrial		58,877		11,873		8,611		60		79,421
Consumer		30,872		331		77		41		31,321
All other		44,047		2,939		12,764		573		60,323
Total	$	584,104	$	43,911	$	74,623	$	1,384	$	704,022

As of December 31, 2010, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Loan Class	Pass		Special Mention		Substandard		Doubtful		Total Loans

Residential real estate	$	210,519	$	13,696	$	9,091	$	207	$	233,513
Multifamily real estate		24,231		5,955		10,851		-		41,037
Commercial real estate:
Owner occupied		79,147		11,024		16,373		380		106,924
Non-owner occupied		136,019		3,086		16,734		-		155,839
Commercial and industrial		56,842		17,112		8,524		113		82,591
Consumer		32,537		233		113		43		32,926
All other		57,106		4,336		11,119		573		73,134
Total	$	596,401	$	55,442	$	72,805	$	1,316	$	725,964