Note 5 - Allowance for Loan Losses and Reserve for Unfunded Lending Commitments

Changes in the allowance for loan losses and the reserve for unfunded lending commitments as of the indicated dates and periods are presented below:

The reserve for unfunded loan commitments is included in other liabilities.

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

Allowance for Loan Losses
Balance, beginning of period	$	10,529		$	8,420		$	8,420
Provision for loan losses		1,466			3,170			673
Charge-offs		(863	)		(1,863	)		(705	)
Recoveries		967			802			356
Balance, end of period	$	12,099		$	10,529		$	8,744

Reserve for Unfunded Lending Commitments
Balance, beginning of period	$	200		$	218		$	218
Provision for loan losses		6			(18	)		9
Charge-offs		-			-			-
Balance, end of period	$	206		$	200		$	227

The following table presents the Company's allowance for loan losses by portfolio segment and the related loan balance total by segment at June 30, 2012.

				Commercial			Residential
	Commercial			Real Estate			Real Estate			Consumer			Total
(in thousands)

Allowance for Loan Losses
Balance as of December 31, 2011	$	1,236		$	5,719		$	3,412		$	162		$	10,529
Charge-offs		(287	)		(232	)		(314	)		(30	)		(863	)
Recoveries		554			312			63			38			967
Provision		204			796			443			23			1,466
Balance as of June 30, 2012	$	1,707		$	6,595		$	3,604		$	193		$	12,099

Balances at June 30, 2012:

Allowance for Loan Losses
Individually evaluated for impairment	$	158		$	69		$	114		$	-		$	341
Collectively evaluated for impairment		1,549			6,526			3,490			193			11,758
Total	$	1,707		$	6,595		$	3,604		$	193		$	12,099

Loans
Individually evaluated for impairment	$	473		$	2,467		$	1,318		$	-		$	4,258
Collectively evaluated for impairment		125,553			389,281			256,860			7,454			779,148
Loans acquired with deteriorated credit quality		2,820			13,606			8,237			-			24,663
Total	$	128,846		$	405,354		$	266,415		$	7,454		$	808,069

The following table presents the Company's allowance for loan losses by portfolio segment and the related loan balance total by segment at December 31, 2011.

				Commercial			Residential
	Commercial			Real Estate			Real Estate			Consumer			Total
(in thousands)

Allowance for Loan Losses
Balance as of December 31, 2010	$	751		$	4,631		$	2,921		$	117		$	8,420
Charge-offs		(163	)		(702	)		(871	)		(127	)		(1,863	)
Recoveries		373			306			50			73			802
Provision		275			1,484			1,312			99			3,170
Balance as of December 31, 2011	$	1,236		$	5,719		$	3,412		$	162		$	10,529

Balance as of December 31, 2011:

Allowance for Loan Losses
Individually evaluated for impairment	$	-		$	129		$	1		$	-		$	130
Collectively evaluated for impairment		1,236			5,590			3,411			162			10,399
Total	$	1,236		$	5,719		$	3,412		$	162		$	10,529

Loans
Individually evaluated for impairment	$	-		$	1,894		$	1,295		$	49		$	3,238
Collectively evaluated for impairment		131,754			381,175			266,421			8,143			787,493
Loans acquired with deteriorated credit quality		2,411			23,325			8,291			-			34,027
Total	$	134,165		$	406,394		$	276,007		$	8,192		$	824,758

The allowance for loan losses is allocated to loan segments based upon historical loss factors, risk grades on individual loans, portfolio analyses of smaller balance, homogenous loans, and qualitative factors. Qualitative factors include trends in delinquencies, nonaccrual loans, and loss rates; trends in volume and terms of loans, effects of changes in risk selection, underwriting standards, and lending policies; experience of lending officers and other lending staff; national and local economic trends and conditions; and concentrations of credit.