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Allowance For Loan Losses

6 Months Ended

Jun. 30, 2011

Note 4. Allowance for Loan Losses

Transactions in the allowance for loan losses for the six months ended June 30, 2011 and 2010 and for the year ended December 31, 2010 were as follows:


	(in thousands)
	June 30, 2011			December 31, 2010			June 30, 2010
Balance at beginning of year	$	16,036		$	7,106		$	7,106
Provision charged to operating expense		3,820			11,731			1,411
Loan recoveries		156			261			134
Loan charge-offs		(6,234	)		(3,062	)		(1,017	)

Balance at end of period	$	13,778		$	16,036		$	7,634

The following tables present, as of June 30, 2011 and December 31, 2010, the total allowance for loan losses, the allowance by impairment methodology and loans by impairment methodology.


	June 30, 2011
	(in thousands)
	Commercial and Industrial			Other Real Estate			Construction			Secured by 1-4 Family Residential			Consumer Loans			Total
Allowance for loan losses:
Beginning Balance, December 31, 2010	$	858		$	9,187		$	4,050		$	1,681		$	260		$	16,036
Charge-offs		(22	)		(2,939	)		(2,556	)		(569	)		(148	)		(6,234	)
Recoveries		—			—			—			—			156			156
Provision for loan losses		245			1,978			783			755			59			3,820

Ending Balance, June 30, 2011	$	1,081		$	8,226		$	2,277		$	1,867		$	327		$	13,778


Ending Balance:
Individually evaluated for impairment		210			3,655			923			1,236			—			6,025
Collectively evaluated for impairment		871			4,571			1,354			631			327			7,753

Loans:
Ending Balance	$	35,513		$	195,766		$	50,741		$	120,575		$	12,907		$	415,502

Individually evaluated for impairment		225			21,206			5,844			6,629			—			33,905
Collectively evaluated for impairment		35,288			174,560			44,897			113,946			12,907			381,597

	December 31, 2010
	(in thousands)
	Commercial and Industrial			Other Real Estate			Construction			Secured by 1-4 Family Residential			Consumer Loans			Total
Allowance for loan losses:
Ending Balance	$	858		$	9,187		$	4,050		$	1,681		$	260		$	16,036

Ending Balance:
Individually evaluated for impairment		36			5,020			3,006			536			—			8,597
Collectively evaluated for impairment		822			4,167			1,044			1,145			260			7,439

Loans:
Ending Balance		40,683			207,371			52,591			121,506			12,879			435,030

Ending Balance:
Individually evaluated for impairment		48			28,426			9,709			5,682			—			43,865
Collectively evaluated for impairment		40,635			178,945			42,882			115,824			12,879			391,165

Impaired loans and the related allowance at June 30, 2011 and December 31, 2010, were as follows:


	June 30, 2011
	(in thousands)
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
Real estate loans:
Construction	$	7,860	$	3,022	$	2,822	$	5,844	$	923	$	7,311	$	65
Secured by 1-4 family		6,680		453		6,176		6,629		1,236		6,186		98
Other real estate loans		24,134		9,853		11,353		21,206		3,655		25,569		398
Commercial and industrial		225		14		210		225		210		72		6
Consumer		—		—		—		—		—		—		—

Total	$	38,898	$	13,343	$	20,562	$	33,905	$	6,025	$	39,138	$	567


	December 31, 2010
	(in thousands)
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
Real estate loans:
Construction	$	10,440	$	1,217	$	8,492	$	9,709	$	3,006	$	2,920	$	374
Secured by 1-4 family		5,701		595		5,087		5,682		536		795		222
Other real estate loans		29,480		7,904		20,522		28,426		5,020		18,432		1,345
Commercial and industrial		48		—		48		48		36		163		4
Consumer		—		—		—		—		—		—		—

Total	$	45,669	$	9,716	$	34,149	$	43,865	$	8,597	$	22,310	$	1,945

The "Recorded Investment" amounts in the table above represent the outstanding principal balance on each loan represented in the table. The "Unpaid Principal Balance" represents the outstanding principal balance on each loan represented in the table plus any amounts that have been charged off on each loan and/or payments that have been applied towards principal on nonaccrual loans.

During the first quarter of 2011, the Bank adjusted its allowance for loan losses methodology by expanding the historical loss period that is applied to the general component of the allowance from one year to three years. The Company decreased the loss history to one year after significant deterioration in economic conditions in 2008. Since then, the Company has determined that a three-year loss history is more appropriate to reflect a reasonable loss inherent in the loan portfolio. For further information on the Company's allowance for loan losses methodology, see the "Allowance for Loan Losses" section included in Part I, Item 2 of this Form 10-Q.