				September 30,		December 31,
(In thousands)				2011		2010
Commercial and industrial			$	53,888	$	53,288
Construction and land development				40,781		47,850
Commercial real estate:
	Owner occupied			71,247		76,252
	Other			94,812		89,989
		Total commercial real estate		166,059		166,241
Residential real estate:
	Consumer mortgage			58,935		57,562
	Investment property			43,095		38,679
		Total residential real estate		102,030		96,241
Consumer installment				12,105		10,676
		Total loans		374,863		374,296
Less: unearned income				(75)		(81)
		Loans, net of unearned income	$	374,788	$	374,215

Loans secured by real estate were approximately 82.4% of the total loan portfolio at September 30, 2011. Due to declines in economic indicators and real estate values, loans secured by real estate may have a greater risk of non-collection than other loans. At September 30, 2011, the Company's geographic loan distribution was concentrated primarily in Lee County, Alabama and surrounding areas.

In accordance with ASC 310, a portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for loan losses. The Company's loan portfolio is disaggregated into the following portfolio segments: commercial and industrial, construction and land development, commercial real estate, residential real estate and consumer installment. The Company's loan portfolio segments were determined based on collateral type. Where appropriate, the Company's loan portfolio segments are further disaggregated into classes. A class is generally determined based on the initial measurement attribute, risk characteristics of the loan, and an entity's method for monitoring and determining credit risk.

The following describe the risk characteristics relevant to each of the portfolio segments.

Commercial and industrial (“C&I”) — includes loans to finance business operations, equipment purchases, or other needs for small and medium-sized commercial customers. Also included in this category are loans to finance agricultural production. Generally the primary source of repayment is the cash flow from business operations and activities of the borrower.

Construction and land development (“C&D”) — includes both loans and credit lines for the purpose of purchasing, carrying and developing land into commercial developments or residential subdivisions. Also included are loans and lines for construction of residential, multi-family and commercial buildings. Generally the primary source of repayment is dependent upon the sale or refinance of the real estate collateral.

Commercial real estate (“CRE”) — includes loans disaggregated into two classes: (1) owner occupied and (2) other.

Consumer installment — includes loans to individuals both secured by personal property and unsecured. Loans include personal lines of credit, automobile loans, and other retail loans. These loans are underwritten in accordance with the Bank's general loan policies and procedures which require, among other things, proper documentation of each borrower's financial condition, satisfactory credit history, and if applicable, property value.

The following is a summary of current, accruing past due and nonaccrual loans by portfolio class as of September 30, 2011, and December 31, 2010

					Accruing	Accruing	Total
					30-89 Days	Greater than	Accruing	Non-		Total
(In thousands)			Current		Past Due	90 days	Loans	Accrual		Loans
September 30, 2011:
Commercial and industrial			$	53,603	253	—	53,856	32	$	53,888
Construction and land development				35,452	173	—	35,625	5,156		40,781
Commercial real estate:
	Owner occupied			69,652	—	—	69,652	1,595		71,247
	Other			92,791	—	—	92,791	2,021		94,812
		Total commercial real estate		162,443	—	—	162,443	3,616		166,059
Residential real estate:
	Consumer mortgage			57,532	471	—	58,003	932		58,935
	Investment property			41,845	623	—	42,468	627		43,095
		Total residential real estate		99,377	1,094	—	100,471	1,559		102,030
Consumer installment				11,937	25	—	11,962	143		12,105
		Total	$	362,812	1,545	—	364,357	10,506	$	374,863


December 31, 2010:
Commercial and industrial			$	52,643	124	—	52,767	521	$	53,288
Construction and land development				43,547	201	—	43,748	4,102		47,850
Commercial real estate:
	Owner occupied			73,419	—	—	73,419	2,833		76,252
	Other			88,087	—	—	88,087	1,902		89,989
		Total commercial real estate		161,506	—	—	161,506	4,735		166,241
Residential real estate:
	Consumer mortgage			53,225	2,219	—	55,444	2,118		57,562
	Investment property			37,556	767	—	38,323	356		38,679
		Total residential real estate		90,781	2,986	—	93,767	2,474		96,241
Consumer installment				10,646	29	—	10,675	1		10,676
		Total	$	359,123	3,340	—	362,463	11,833	$	374,296

At September 30, 2011 and December 31, 2010, nonaccrual loans amounted to $10.5 and $11.8 million, respectively. At September 30, 2011 and December 31, 2010, there were no loans 90 days past due and still accruing interest.

The Company assesses the adequacy of its allowance for loan losses prior to the end of each calendar quarter. The level of the allowance is based upon management's evaluation of the loan portfolios, past loan loss experience, current asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay (including the timing of future payment), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, industry and peer bank loan loss rates and other pertinent factors, including regulatory recommendations. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. Loan losses are charged off when management believes that the full collectability of the loan is unlikely. A loan may be partially charged-off after a “confirming event” has occurred which serves to validate that full repayment pursuant to the terms of the loan is unlikely. Allocation of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management's judgment, is deemed to be uncollectible.

The Company deems loans impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Collection of all amounts due according to the contractual terms means that both the interest and principal payments of a loan will be collected as scheduled in the loan agreement.

An impairment allowance is recognized if the fair value of the loan is less than the recorded investment in the loan. The impairment is recognized through the allowance. Loans that are impaired are recorded at the present value of expected future cash flows discounted at the loan's effective interest rate, or if the loan is collateral dependent, impairment measurement is based on the fair value of the collateral, less estimated disposal costs.

The level of allowance maintained is believed by management to be adequate to absorb probable losses inherent in the portfolio at the balance sheet date. The allowance is increased by provisions charged to expense and decreased by charge-offs, net of recoveries of amounts previously charged-off.

In assessing the adequacy of the allowance, the Company also considers the results of its ongoing independent loan review process. The Company's loan review process assists in determining whether there are loans in the portfolio whose credit quality has weakened over time and evaluating the risk characteristics of the entire loan portfolio. The Company's loan review process includes the judgment of management, the input from our independent loan reviewers, and reviews that may have been conducted by bank regulatory agencies as part of their examination process. The Company incorporates loan review results in the determination of whether or not it is probable that we will be able to collect all amounts due according to the contractual terms of a loan.

As part of the Company's quarterly assessment of the allowance, management divides the loan portfolio into five segments: commercial and industrial loans, construction and land development loans, commercial real estate, residential real estate, and consumer installment loans. The Company analyzes each segment and estimates an allowance allocation for each loan segment.

The allocation of the allowance for loan losses begins with a process of estimating the probable losses inherent for these types of loans. The estimates for these loans are established by category and based on the Company's internal system of credit risk ratings and historical loss data. The estimated loan loss allocation rate for the Company's internal system of credit risk grades is based on its experience with similarly graded loans. For loan segments where the Company believes it does not have sufficient historical loss data, the Company may make adjustments based, in part, on loss rates of peer bank groups. Consistent with prior periods, at September 30, 2011 and December 31, 2010, the Company adjusted its historical loss rates for the commercial real estate portfolio segment based, in part, on loss rates of peer bank groups.

The estimated loan loss allocation for all five loan portfolio segments is then adjusted for management's estimate of probable losses for several “qualitative and environmental” factors. The allocation for qualitative and environmental factors is particularly subjective and does not lend itself to exact mathematical calculation. This amount represents estimated probable inherent credit losses which exist, but have not yet been identified, as of the balance sheet date, and are based upon quarterly trend assessments in delinquent and nonaccrual loans, credit concentration changes, prevailing economic conditions, changes in lending personnel experience, changes in lending policies or procedures and other influencing factors. These qualitative and environmental factors are considered for each of the five loan segments and the allowance allocation, as determined by the processes noted above, is increased or decreased based on the incremental assessment of these factors.

The Company maintains an unallocated amount for inherent factors that cannot be practically assigned to individual loan segments or categories that is needed due to the imprecision in the overall measurement process.

The following table details the changes in the allowance for loan losses by portfolio segment for the quarter and nine months ended September 30, 2011.

			September 30, 2011
(In thousands)			Commercial and industrial	Construction and land development	Commercial real estate	Residential real estate	Consumer installment	Unallocated		Total
Quarter ended:
Beginning balance		$	767	2,759	2,722	1,104	190	204	$	7,746
Charge-offs			(298)	(1,572)	(79)	(73)	(7)	—		(2,029)
Recoveries			5	1	—	14	3	—		23
	Net (charge-offs) recoveries		(293)	(1,571)	(79)	(59)	(4)	—		(2,006)
Provision			288	(50)	0	359	(8)	11		600
Ending balance		$	762	1,138	2,643	1,404	178	215	$	6,340

Nine months ended:
Beginning balance		$	972	2,223	2,893	1,336	141	111	$	7,676
Charge-offs			(659)	(1,717)	(419)	(519)	(11)	—		(3,325)
Recoveries			28	2	—	149	10	—		189
	Net (charge-offs) recoveries		(631)	(1,715)	(419)	(370)	(1)	—		(3,136)
Provision			421	630	169	438	38	104		1,800
Ending balance		$	762	1,138	2,643	1,404	178	215	$	6,340

			Collectively evaluated (1)		Individually evaluated (2)		Total
			Allowance	Recorded	Allowance	Recorded	Allowance	Recorded
			for loan	investment	for loan	investment	for loan	investment
(In thousands)			losses	in loans	losses	in loans	losses	in loans
September 30, 2011:
Commercial and industrial		$	762	53,661	—	227	762	53,888
Construction and land development			929	35,625	209	5,156	1,138	40,781
Commercial real estate			2,221	162,374	422	3,685	2,643	166,059
Residential real estate			1,163	100,713	241	1,317	1,404	102,030
Consumer installment			178	12,105	—	—	178	12,105
Unallocated			215	—	—	—	215	—
	Total	$	5,468	364,478	872	10,385	6,340	374,863

December 31, 2010:
Commercial and industrial		$	695	52,767	277	521	972	53,288
Construction and land development			2,100	43,748	123	4,102	2,223	47,850
Commercial real estate			2,128	161,611	765	4,630	2,893	166,241
Residential real estate			1,192	93,823	144	2,418	1,336	96,241
Consumer installment			141	10,676	—	—	141	10,676
Unallocated			111	—	—	—	111	—
	Total	$	6,367	362,625	1,309	11,671	7,676	374,296

(1)	Represents loans collectively evaluated for impairment in accordance with ASC 450-20, Loss Contingencies (formerly FAS 5), and
	pursuant to amendments by ASU 2010-20 regarding allowance for unimpaired loans.
(2)	Represents loans individually evaluated for impairment in accordance with ASC 310-30, Receivables (formerly FAS 114), and
	pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans.

The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies. The following table presents credit quality indicators for the loan portfolio segments and classes. These categories are utilized to develop the associated allowance for loan losses using historical losses adjusted for current economic conditions and are defined as follows:

				September 30, 2011
(In thousands)				Pass	Special Mention	Substandard Accruing	Nonaccrual		Total loans
Commercial and industrial			$	51,602	1,460	794	32	$	53,888
Construction and land development				34,233	279	1,113	5,156		40,781
Commercial real estate:
	Owner occupied			63,149	4,996	1,507	1,595		71,247
	Other			83,956	627	8,208	2,021		94,812
		Total commercial real estate		147,105	5,623	9,715	3,616		166,059
Residential real estate:
	Consumer mortgage			50,977	2,335	4,691	932		58,935
	Investment property			38,675	2,246	1,547	627		43,095
		Total residential real estate		89,652	4,581	6,238	1,559		102,030
Consumer installment				11,741	115	106	143		12,105
		Total	$	334,333	12,058	17,966	10,506	$	374,863

				December 31, 2010
(In thousands)				Pass	Special Mention	Substandard Accruing	Nonaccrual		Total loans
Commercial and industrial			$	51,632	722	413	521	$	53,288
Construction and land development				38,301	4,372	1,075	4,102		47,850
Commercial real estate:
	Owner occupied			67,702	716	5,001	2,833		76,252
	Other			84,354	3,718	15	1,902		89,989
		Total commercial real estate		152,056	4,434	5,016	4,735		166,241
Residential real estate:
	Consumer mortgage			48,620	2,700	4,124	2,118		57,562
	Investment property			34,221	1,626	2,476	356		38,679
		Total residential real estate		82,841	4,326	6,600	2,474		96,241
Consumer installment				10,426	133	116	1		10,676
		Total	$	335,256	13,987	13,220	11,833	$	374,296

The following tables present details related to the Company's impaired loans. Loans which have been fully charged-off do not appear in the following table. The related allowance generally represents the following components which correspond to impaired loans:

The following tables set forth certain information regarding the Company's impaired loans that were individually evaluated for impairment at September 30, 2011 and December 31, 2010.


				September 30, 2011
(In thousands)				Unpaid principal balance (1)	Charge-offs and payments applied (2)	Recorded investment (3)		Related allowance
With no allowance recorded:
Commercial and industrial			$	227	—	227
Construction and land development				3,958	(1,572)	2,386
Commercial real estate:
	Owner occupied			811	(11)	800
	Other			655	(44)	611
		Total commercial real estate		1,466	(55)	1,411
Residential real estate:
	Consumer mortgages			—	—	—
	Investment property			—	—	—
		Total residential real estate		—	—	—
Consumer installment				—	—	—
		Total	$	5,651	(1,627)	4,024
With allowance recorded:
Commercial and industrial			$	—	—	—	$	—
Construction and land development				2,913	(143)	2,770		209
Commercial real estate:
	Owner occupied			1,104	(24)	1,080		204
	Other			1,240	(46)	1,194		218
		Total commercial real estate		2,344	(70)	2,274		422
Residential real estate:
	Consumer mortgages			1,005	(79)	926		71
	Investment property			391	—	391		170
		Total residential real estate		1,396	(79)	1,317		241
Consumer installment				—	—	—		—
		Total	$	6,653	(292)	6,361	$	872
		Total impaired loans	$	12,304	(1,919)	10,385	$	872

(1) Unpaid principal balance represents the contractual obligation due from the customer.
(2) Charge-offs and payments applied represents cumulative charge-offs taken, as well as interest payments that have been
	applied against the outstanding principal balance.
(3) Recorded investment represents the unpaid principal balance less charge-offs and payments applied; it is shown before
	any related allowance for loan losses.

				December 31, 2010
(In thousands)				Unpaid principal balance (1)	Charge-offs and payments applied (2)	Recorded investment (3)		Related allowance
With no allowance recorded:
Commercial and industrial			$	—	—	—
Construction and land development				2,538	(54)	2,484
Commercial real estate:
	Owner occupied			—	—	—
	Other			1,592	(51)	1,541
		Total commercial real estate		1,592	(51)	1,541
Residential real estate:
	Consumer mortgages			1,072	(27)	1,045
	Investment property			356	—	356
		Total residential real estate		1,428	(27)	1,401
Consumer installment				—	—	—
		Total	$	5,558	(132)	5,426
With allowance recorded:
Commercial and industrial			$	528	(7)	521	$	277
Construction and land development				1,618	—	1,618		123
Commercial real estate:
	Owner occupied			3,124	(35)	3,089		765
	Other			—	—	—		—
		Total commercial real estate		3,124	(35)	3,089		765
Residential real estate:
	Consumer mortgages			1,073	(56)	1,017		144
	Investment property			—	—	—		—
		Total residential real estate		1,073	(56)	1,017		144
Consumer installment				—	—	—		—
		Total	$	6,343	(98)	6,245	$	1,309
		Total impaired loans	$	11,901	(230)	11,671	$	1,309

(1) Unpaid principal balance represents the contractual obligation due from the customer.
(2) Charge-offs and payments applied represents cumulative charge-offs taken, as well as interest payments that have been
	applied against the outstanding principal balance.
(3) Recorded investment represents the unpaid principal balance less charge-offs and payments applied; it is shown before
	any related allowance for loan losses.

The following table provides the average recorded investment in impaired loans and the amount of interest income recognized on impaired loans after impairment by portfolio segment and class.

				Quarter ended September 30, 2011		Nine months ended September 30, 2011
				Average	Total interest	Average	Total interest
				recorded	income	recorded	income
(In thousands)				investment	recognized	investment	recognized
Impaired loans:
Commercial and industrial			$	229	3	345	5
Construction and land development				3,589	—	3,843	—
Commercial real estate:						—	—
	Owner occupied			1,886	10	1,769	17
	Other			2,096	—	2,545	—
		Total commercial real estate		3,982	10	4,314	17
Residential real estate:
	Consumer mortgages			934	—	1,514	—
	Investment property			130	—	75	—
		Total residential real estate		1,064	—	1,589	—
Consumer installment				—	—	—	—
		Total	$	8,864	13	10,091	22

Impaired loans also included TDRs. In the normal course of business, management grants concessions to borrowers, which would not otherwise be considered where the borrowers are experiencing financial difficulty. A concession may include, but is not limited to, reduction of the stated interest rate of the loan, reduction of accrued interest, extension of the maturity date or reduction of the face amount or maturity amount of the debt. A concession has been granted when, as a result of the restructuring, the Bank does not expect to collect all amounts due, including interest at the original stated rate. A concession may have also been granted if the debtor is not able to access funds elsewhere at a market rate for debt with similar risk characteristics as the restructured debt. The Company's determination of whether a loan modification is a TDR considers the individual facts and circumstances surrounding each modification. As part of the credit approval process, the restructured loans are evaluated for adequate collateral protection in determining the appropriate accrual status at the time of restructure.

Similar to other impaired loans, TDRs are measured for impairment based on the present value of expected payments using the loan's original effective interest rate as the discount rate, or the fair value of the collateral, less selling costs if the loan is collateral dependent. If the recorded investment in the loan exceeds the measure of fair value, impairment is recognized by establishing a valuation allowance as part of the allowance for loan losses or a charge-off to the allowance for loan losses. In periods subsequent to the modification, all TDRs are evaluated, including those that have payment defaults, for possible impairment.

At September 30, 2011 and December 31, 2010, the Company had impaired loans classified as TDRs of $9.5 million and $7.6 million, respectively. At September 30, 2011 the Company had $0.7 million in accruing TDRs. The Company had no accruing TDRs at December 31, 2010. For impaired loans classified as TDRs, the related allowance for loan losses was approximately $0.8 million and $1.0 million at September 30, 2011 and December 31, 2010, respectively. At September 30, 2011, there were no significant outstanding commitments to advance additional funds to customers whose loans had been restructured.

Effective July 1, 2011, the Company adopted ASU 2011-02, A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring. See Note 1. As such, the Company reassessed all restructurings that occurred on or after January 1, 2011 for identification and disclosure as TDRs.

The following table summarizes the recorded investment in loans modified in a TDR both before and after their modification during the respective period.

			Quarter ended September 30, 2011				Nine months ended September 30, 2011
					Pre-	Post -			Pre-	Post -
					modification	modification			modification	modification
			Number		outstanding	outstanding	Number		outstanding	outstanding
			of		recorded	recorded	of		recorded	recorded
($ in thousands)			contracts		investment	investment	contracts		investment	investment
TDRs:
Commercial and industrial			1	$	283	283	2	$	791	523
Construction and land development			2		4,432	4,419	3		4,925	4,894
Commercial real estate:
	Owner occupied		1		256	256	4		2,202	1,915
	Other		—		—	—	1		1,229	1,229
		Total commercial real estate	1		256	256	5		3,431	3,144
Residential real estate:
	Consumer mortgages		—		—	—	—		—	—
	Investment property		1		391	391	1		391	391
		Total residential real estate	1		391	391	1		391	391
Consumer installment			—		—	—	—			—
		Total	5	$	5,362	5,349	11	$	9,538	8,952

The majority of the loans modified in a TDR during the quarter and nine months ended September 30, 2011 included delays in required payments of principal and/or interest or where the only concession granted by the Company was that the interest rate at renewal was not considered to be a market rate. Only two modifications during the nine months ended September 30, 2011 were A/B note restructurings, where the B note was charged off. Total charge-offs related to B notes during the nine months ended September 30, 2011 were approximately $0.6 million.

As of September 30, 2011, there were no loans modified in a TDR within the previous 12 months for which there was a payment default (defined as more than 90 days past due) and an outstanding loan balance.