(5) Allowance for Loan Losses

Changes in the allowance for loan losses for the years ended December 31 are as follows:

	December 31
	2011			2010			2009

Balance, Beginning of Year	$	28,280,077		$	31,400,641		$	17,015,883

Provision for Loan Losses		8,250,000			13,350,000			43,445,000
Loans Charged Off		(22,850,673	)		(17,622,454	)		(29,493,324	)
Recoveries of Loans Previously Charged Off		1,970,190			1,151,890			433,082

Balance, End of Year	$	15,649,594		$	28,280,077		$	31,400,641

The following table details activity in the allowance for loan losses, segregated by class of loan, for the year ended December 31, 2011. 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.

2011	Beginning Balance		Charge-Offs			Recoveries		Provision			Ending Balance

Commercial and Industrial
Commercial	$	4,414,817	$	(841,887	)	$	127,490	$	(2,629,860	)	$	1,070,560
Industrial		698,637		(455,165	)		454,453		(400,757	)		297,168

Real Estate
Commercial Construction		4,126,043		(6,957,181	)		557,168		5,396,564			3,122,594
Residential Construction		519,766		(481	)		-		(381,193	)		138,092
Commercial		8,029,525		(12,492,097	)		527,996		10,382,640			6,448,064
Residential		5,941,696		(1,704,887	)		149,173		(690,625	)		3,695,357
Farmland		944,323		(60,447	)		411		(519,624	)		364,663

Consumer and Other
Consumer		3,074,220		(222,878	)		145,279		(2,791,467	)		205,154
Other		531,050		(115,650	)		8,220		(115,678	)		307,942

	$	28,280,077	$	(22,850,673	)	$	1,970,190	$	8,250,000		$	15,649,594

The following table details activity in the allowance for loan losses, segregated by class of loan, for the year ended December 31, 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.

2010	Beginning Balance		Charge-Offs			Recoveries		Provision		Ending Balance

Commercial and Industrial
Commercial	$	3,930,760	$	(469,214	)	$	80,181	$	873,090	$	4,414,817
Industrial		779,337		(255,627	)		1,377		173,550		698,637

Real Estate
Commercial Construction		7,402,484		(4,648,124	)		184,868		1,186,815		4,126,043
Residential Construction		447,676		-			-		72,090		519,766
Commercial		8,790,443		(7,459,619	)		141,931		6,556,770		8,029,525
Residential		5,025,839		(2,929,668	)		439,940		3,405,585		5,941,696
Farmland		942,019		(271,750	)		7,639		266,415		944,323

Consumer and Other
Consumer		2,826,058		(548,834	)		245,641		551,355		3,074,220
Other		1,256,025		(1,039,618	)		50,313		264,330		531,050

	$	31,400,641	$	(17,622,454	)	$	1,151,890	$	13,350,000	$	28,280,077

The Company determines its individual loan reserves during its quarterly review of substandard loans. This process involves reviewing all loans with a risk grade of 6 or below and an outstanding balance of $50,000 or more. At December 31, 2011 and 2010, impaired loans totaling $995,168 and $976,971 were below the $50,000 review threshold and were not individually reviewed for impairment. Those loans were subject to the bank's general loan loss reserve methodology and are included in the “Collectively Evaluated for Impairment” column of the following tables. Since not all loans in the substandard category are considered impaired, this quarterly assessment often results in the identification of individual reserves which are placed against certain loans as part of management's allowance for loan loss calculation. The total of these loans and the related reserves are presented in the column titled “Substandard Loans Individually Reviewed for Impairment” in the following tables. The following tables present breakdowns of the allowance for loan losses, segregated by impairment methodology for December 31, 2011 and 2010:

					Ending Allowance Balance
2011	Nonaccrual/TDR Individually Evaluated for Impairment		Substandard Individually Evaluated for Impairment		Total Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total

Commercial and Industrial
Commercial	$	308,211	$	590,543	$	898,754	$	171,806	$	1,070,560
Industrial		-		-		-		297,168		297,168

Real Estate
Commercial Construction		2,693,571		190,800		2,884,371		238,223		3,122,594
Residential Construction		-		-		-		138,092		138,092
Commercial		2,060,815		347,260		2,408,075		4,039,989		6,448,064
Residential		674,998		764,835		1,439,833		2,255,524		3,695,357
Farmland		11,878		-		11,878		352,785		364,663

Consumer and Other
Consumer		1,632		33,000		34,632		170,522		205,154
Other		-		-		-		307,942		307,942

Total End of Period Allowance Balance	$	5,751,105	$	1,926,438	$	7,677,543	$	7,972,051	$	15,649,594

					Ending Loan Balance
2011	Nonaccrual/TDR Individually Evaluated for Impairment		Substandard Individually Evaluated for Impairment		Total Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total

Commercial and Industrial
Commercial	$	2,237,878	$	2,300,231	$	4,538,109	$	44,447,993	$	48,986,102
Industrial		-		164,090		164,090		8,257,794		8,421,884

Real Estate
Commercial Construction		24,212,519		2,560,484		26,773,003		31,772,817		58,545,820
Residential Construction		-		-		-		3,530,502		3,530,502
Commercial		35,715,026		4,629,461		40,344,487		274,936,261		315,280,748
Residential		5,614,744		4,441,958		10,056,702		183,581,115		193,637,817
Farmland		486,683		2,589,640		3,076,323		45,149,083		48,225,406

Consumer and Other
Consumer		9,596		38,354		47,950		30,401,353		30,449,303
Other		-		22,166		22,166		9,221,573		9,243,739

Total End of Period Loan Balance	$	68,276,446	$	16,746,384	$	85,022,830	$	631,298,491	$	716,321,321

The presentation of loans individually reviewed for impairment is consolidated into one column for the year ended December 31, 2010.

	Ending Allowance Balance
2010	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total

Commercial and Industrial
Commercial	$	336,011	$	4,078,806	$	4,414,817
Industrial		-		698,637		698,637

Real Estate
Commercial Construction		3,501,117		624,926		4,126,043
Residential Construction		-		519,766		519,766
Commercial		7,539,533		489,992		8,029,525
Residential		1,561,952		4,379,744		5,941,696
Farmland		-		944,323		944,323

Consumer and Other
Consumer		3,033		3,071,187		3,074,220
Other		-		531,050		531,050

Total End of Period Allowance Balance	$	12,941,646	$	15,338,431	$	28,280,077

	Ending Loan Balance
2010	Individually Reviewed for Impairment		Collectively Reviewed for Impairment		Total

Commercial and Industrial
Commercial	$	2,131,375	$	51,088,966	$	53,220,341
Industrial		274,679		10,277,112		10,551,791

Real Estate
Commercial Construction		28,392,107		43,917,124		72,309,231
Residential Construction		194,881		4,178,130		4,373,011
Commercial		58,562,946		304,315,619		362,878,565
Residential		13,645,907		193,825,906		207,471,813
Farmland		1,416,538		51,361,851		52,778,389

Consumer and Other
Consumer		76,420		33,487,443		33,563,863
Other		113,002		15,990,667		16,103,669

	$	104,807,855	$	708,442,818	$	813,250,673