				June 30,		December 31,
(In thousands)				2011		2010
Commercial and industrial			$	52,027	$	53,288
Construction and land development				43,864		47,850
Commercial real estate:
	Owner occupied			74,928		76,252
	Other			91,344		89,989
		Total commercial real estate		166,272		166,241
Residential real estate:
	Consumer mortgage			58,816		57,562
	Investment property			41,680		38,679
		Total residential real estate		100,496		96,241
Consumer installment				11,248		10,676
		Total loans		373,907		374,296
Less: unearned income				(112)		(81)
		Loans, net of unearned income	$	373,795	$	374,215

Loans secured by real estate were approximately 83.1% of the total loan portfolio at June 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 June 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.

Residential real estate (“RRE”) — includes loans disaggregated into two classes: (1) consumer mortgage and (2) investment property.

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 June 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
June 30, 2011:
Commercial and industrial			$	51,885	94	—	51,979	48	$	52,027
Construction and land development				41,020	—	—	41,020	2,844		43,864
Commercial real estate:
	Owner occupied			73,483	255	—	73,738	1,190		74,928
	Other			88,465	201	—	88,666	2,678		91,344
		Total commercial real estate		161,948	456	—	162,404	3,868		166,272
Residential real estate:
	Consumer mortgage			57,791	—	11	57,802	1,014		58,816
	Investment property			41,089	360	—	41,449	231		41,680
		Total residential real estate		98,880	360	11	99,251	1,245		100,496
Consumer installment				11,087	15	—	11,102	146		11,248
		Total	$	364,820	925	11	365,756	8,151	$	373,907


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 June 30, 2011 and December 31, 2010, nonaccrual loans amounted to $8.2 and $11.8 million, respectively. At June 30, 2011, there was $11,000 in loans 90 days past due and still accruing interest. At 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 Company believes it follows appropriate accounting and regulatory guidance in determining impairment and accrual status of impaired loans.

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 June 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. An example is the imprecision in the overall measurement process.

The following table presents an analysis of the allowance for loan losses by portfolio segment as of June 30, 2011 and December 31, 2010. The total allowance for loan losses is then disaggregated to show the amounts derived through individual evaluation and the amounts calculated through collective evaluation.

			Six months ended June 30, 2011
(In thousands)			Commercial and industrial	Construction and land development	Commercial real estate	Residential real estate	Consumer installment	Unallocated		Total
Allowance for loan losses:
Beginning balance		$	972	2,223	2,893	1,336	141	111	$	7,676
Charge-offs			(362)	(145)	(339)	(446)	(3)	—		(1,295)
Recoveries			23	1	—	135	6	—		165
	Net (charge-offs) recoveries		(339)	(144)	(339)	(311)	3	—		(1,130)
Provision			134	680	168	79	46	93		1,200
Ending balance		$	767	2,759	2,722	1,104	190	204	$	7,746
Individually evaluated			—	282	385	94	—	—		761
Collectively evaluated			767	2,477	2,337	1,010	190	204		6,985

Total loans:		$	52,027	43,864	166,272	100,496	11,248		$	373,907
Individually evaluated			233	2,844	4,319	949	—			8,345
Collectively evaluated			51,794	41,020	161,953	99,547	11,248			365,562

		December 31, 2010
(In thousands)		Commercial and industrial	Construction and land development	Commercial real estate	Residential real estate	Consumer installment	Unallocated		Total
Allowance for loan losses:	$	972	2,223	2,893	1,336	141	111	$	7,676
Individually evaluated		277	123	765	144	—	—		1,309
Collectively evaluated		695	2,100	2,128	1,192	141	111		6,367

Total loans:	$	53,288	47,850	166,241	96,241	10,676		$	374,296
Individually evaluated		521	4,102	4,630	2,418	—			11,671
Collectively evaluated		52,767	43,748	161,611	93,823	10,676			362,625

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:

				June 30, 2011
(In thousands)				Pass	Special Mention	Substandard Accruing	Nonaccrual		Total loans
Commercial and industrial			$	48,984	2,004	991	48	$	52,027
Construction and land development				35,898	106	5,016	2,844		43,864
Commercial real estate:
	Owner occupied			67,161	4,814	1,763	1,190		74,928
	Other			80,916	204	7,546	2,678		91,344
		Total commercial real estate		148,077	5,018	9,309	3,868		166,272
Residential real estate:
	Consumer mortgage			51,067	2,822	3,913	1,014		58,816
	Investment property			37,695	2,280	1,474	231		41,680
		Total residential real estate		88,762	5,102	5,387	1,245		100,496
Consumer installment				10,893	100	109	146		11,248
		Total	$	332,614	12,330	20,812	8,151	$	373,907

				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 table presents 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 table sets forth certain information regarding the Company's impaired loans that were individually evaluated for impairment at June 30, 2011 and December 31, 2010.


				June 30, 2011						Six months ended June 30, 2011
(In thousands)				Unpaid principal balance (1)	Charge-offs and payments applied (2)	Recorded investment (3)		Related allowance		Average recorded investment		Interest income recognized (4)
With no allowance recorded:
Commercial and industrial			$	233	—	233			$	395	$	2
Construction and land development				—	—	—				1,390		—
Commercial real estate:
	Owner occupied			811	(5)	806				764		6
	Other			1,580	(102)	1,478				1,508		—
		Total commercial real estate		2,391	(107)	2,284				2,272		6
Residential real estate:
	Consumer mortgages			—	—	—				58		—
	Investment property			—	—	—				51		—
		Total residential real estate		—	—	—				109		—
Consumer installment				—	—	—				—		—
		Total	$	2,624	(107)	2,517			$	4,166	$	8
With allowance recorded:
Commercial and industrial			$	—	—	—	$	—	$	—	$	—
Construction and land development				2,959	(115)	2,844		282		2,562		—
Commercial real estate:
	Owner occupied			848	(14)	834		159		956		—
	Other			1,229	(28)	1,201		226		1,229		—
		Total commercial real estate		2,077	(42)	2,035		385		2,185		—
Residential real estate:
	Consumer mortgages			1,010	(61)	949		94		1,704		—
	Investment property			—	—	—		—		—		—
		Total residential real estate		1,010	(61)	949		94		1,704		—
Consumer installment				—	—	—		—		—		—
		Total	$	6,046	(218)	5,828	$	761	$	6,451	$	—
		Total impaired loans	$	8,670	(325)	8,345	$	761	$	10,617	$	8

(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.
(4) Represents interest income related to accruing TDRs, which are considered impaired.

				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.

At June 30, 2011 and December 31, 2010, the Company had impaired loans classified as troubled debt restructurings (“TDRs”) of $7.4 million and $7.6 million, respectively. At June 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 $0.7 million and $1.0 million at June 30, 2011 and December 31, 2010, respectively. At June 30, 2011, there were no significant outstanding commitments to advance additional funds to customers whose loans had been restructured.