(5) Allowance for Loan Losses

The following tables detail activity in the allowance for loan losses, segregated by class of loan, for June 30, 2011 and June 30, 2010. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other loan categories and periodically may result in reallocation within the provision categories.

Transactions in the allowance for loan losses are summarized below for six months ended June 30, 2011 as follows:

June 30, 2011
	Beginning Balance		Charge-Offs			Recoveries		Provision			Ending Balance

Commercial and Industrial
Commercial	$	4,415	$	(703	)	$	120	$	(1,187	)	$	2,645
Industrial		698		(455	)		--		(178	)		65

Real Estate
Commercial Construction		4,126		(4,062	)		26		1,886			1,976
Residential Construction		520		--			--		(144	)		376
Commercial		8,030		(10,890	)		160		6,086			3,386
Residential		5,942		(751	)		41		(1,234	)		3,998
Farmland		944		(21	)		--		(300	)		623

Consumer and Other
Consumer		3,074		(125	)		87		(905	)		2,131
Other		531		(69	)		6		(274	)		194

	$	28,280	$	(17,076	)	$	440	$	3,750		$	15,394

June 30, 2011
	Ending Balance
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Commercial and Industrial
Commercial	$	606	$	2,039	$	2,645
Industrial		7		58		65

Real Estate
Commercial Construction		1,811		165		1,976
Residential Construction		--		376		376
Commercial		2,058		1,328		3,386
Residential		2,931		1,067		3,998
Farmland		51		572		623

Consumer and Other
Consumer		63		2,068		2,131
Other		--		194		194

Total End of Period Allowance Balance	$	7,527	$	7,867	$	15,394

Total End of Period Loan Balance	$	90,962	$	668,148	$	759,110

The Company determines its individual reserves during its quarterly review of substandard loans. Although not all loans in the substandard category are considered impaired, this quarterly reassessment often results in the identification of individual reserves which are placed against certain loans as part of management's allowance for loan loss calculation.

Transactions in the allowance for loan losses are summarized below for six months ended June 30, 2010 as follows:

June 30, 2010
	Beginning Balance		Charge-Offs			Recoveries		Provision			Ending Balance

Commercial and Industrial
Commercial	$	3,931	$	(281	)	$	73	$	(13	)	$	3,710
Industrial		779		(252	)		--		43			570

Real Estate
Commercial Construction		7,402		(3,713	)		32		3,128			6,849
Residential Construction		448		--			--		(163	)		285
Commercial		8,790		(3,354	)		82		2,472			7,990
Residential		5,026		(2,006	)		367		1,179			4,566
Farmland		942		(75	)		--		(11	)		856

Consumer and Other
Consumer		2,826		(251	)		194		(201	)		2,568
Other		1,257		(349	)		18		216			1,142

	$	31,401	$	(10,281	)	$	766	$	6,650		$	28,536

June 30, 2010
	Ending Balance
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Commercial and Industrial
Commercial	$	171	$	3,539	$	3,710
Industrial		--		570		570

Real Estate
Commercial Construction		2,819		4,030		6,849
Residential Construction		--		285		285
Commercial		4,556		3,434		7,990
Residential		1,468		3,098		4,566
Farmland		128		728		856

Consumer and Other
Consumer		20		2,548		2,568
Other		477		665		1,142

Total End of Period Allowance Balance	$	9,639	$	18,897	$	28,536

Total End of Period Loan Balance	$	98,248	$	758,167	$	856,415