				December 31
(In thousands)				2012		2011
Commercial and industrial			$	59,334	$	54,988
Construction and land development				37,631		39,814
Commercial real estate:
	Owner occupied			64,368		70,202
	Other			119,243		92,233
		Total commercial real estate		183,611		162,435
Residential real estate:
	Consumer mortgage			58,087		57,958
	Investment property			47,544		43,767
		Total residential real estate		105,631		101,725
Consumer installment				12,219		11,454
		Total loans		398,426		370,416
Less: unearned income				(233)		(153)
		Loans, net of unearned income	$	398,193	$	370,263

Loans secured by real estate were approximately 82.0% of the total loan portfolio at December 31, 2012. 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 December 31, 2012, 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. As part of the Company's quarterly assessment of the allowance, the 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. 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 December 31, 2012 and 2011.

					Accruing	Accruing	Total
					30-89 Days	Greater than	Accruing	Non-		Total
(In thousands)			Current		Past Due	90 days	Loans	Accrual		Loans
December 31, 2012:
Commercial and industrial			$	59,101	173	—	59,274	60	$	59,334
Construction and land development				35,917	8	—	35,925	1,706		37,631
Commercial real estate:
	Owner occupied			63,323	—	—	63,323	1,045		64,368
	Other			113,344	230	—	113,574	5,669		119,243
		Total commercial real estate		176,667	230	—	176,897	6,714		183,611
Residential real estate:
	Consumer mortgage			55,521	1,202	58	56,781	1,306		58,087
	Investment property			46,460	335	—	46,795	749		47,544
		Total residential real estate		101,981	1,537	58	103,576	2,055		105,631
Consumer installment				12,157	62	—	12,219	—		12,219
		Total	$	385,823	2,010	58	387,891	10,535	$	398,426


December 31, 2011:
Commercial and industrial			$	53,721	1,191	—	54,912	76	$	54,988
Construction and land development				34,402	317	—	34,719	5,095		39,814
Commercial real estate:
	Owner occupied			68,551	—	—	68,551	1,651		70,202
	Other			90,427	—	—	90,427	1,806		92,233
		Total commercial real estate		158,978	—	—	158,978	3,457		162,435
Residential real estate:
	Consumer mortgage			56,610	400	—	57,010	948		57,958
	Investment property			42,144	845	—	42,989	778		43,767
		Total residential real estate		98,754	1,245	—	99,999	1,726		101,725
Consumer installment				11,397	57	—	11,454	—		11,454
		Total	$	357,252	2,810	—	360,062	10,354	$	370,416

The gross interest income which would have been recorded under the original terms of those nonaccrual loans had they been accruing interest, amounted to approximately $511 thousand, $494 thousand and $346 thousand for the years ended December 31, 2012, 2011, and 2010, respectively.

The allowance for loan losses as of and for the years ended December 31, 2012, 2011 and 2010, is presented below.

		Year ended December 31
(In thousands)			2012		2011		2010
Beginning balance		$	6,919	$	7,676	$	6,495
Charged-off loans			(4,334)		(3,413)		(2,687)
Recovery of previously charged-off loans			323		206		288
	Net charge-offs		(4,011)		(3,207)		(2,399)
Provision for loan losses			3,815		2,450		3,580
Ending balance		$	6,723	$	6,919	$	7,676

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 portfolio, past loan loss experience, current asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect a 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. Loans are charged off, in whole or in part, 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.

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 internal and independent loan review processes. 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 it 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, construction and land development, 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. At December 31, 2012 and 2011, and for the years then ended, 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 regularly re-evaluates its practices in determining the allowance for loan losses. During the fourth quarter of 2011, the Company's management decided to eliminate a previously unallocated component of the allowance. As a result, the Company had no unallocated amount included in the allowance at December 31, 2012 and 2011.

The following table details the changes in the allowance for loan losses by portfolio segment for the years ended December 31, 2012 and 2011.

(in thousands)			Commercial and industrial	Construction and land Development	Commercial Real Estate	Residential Real Estate	Consumer Installment	Unallocated
Balance, December 31, 2010		$	972	2,223	2,893	1,336	141	111	$	7,676
Charge-offs			(679)	(1,758)	(422)	(533)	(21)	—		(3,413)
Recoveries			34	2	—	155	15	—		206
	Net charge-offs		(645)	(1,756)	(422)	(378)	(6)	—		(3,207)
Provision			621	1,003	538	405	(6)	(111)		2,450
Balance, December 31, 2011		$	948	1,470	3,009	1,363	129	—	$	6,919

The following table presents an analysis of the allowance for loan losses and recorded investment in loans by portfolio segment and impairment methodology as of December 31, 2012 and 2011.

			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
December 31, 2012:
Commercial and industrial		$	812	59,165	—	169	812	59,334
Construction and land development			1,417	36,008	129	1,623	1,545	37,631
Commercial real estate			3,002	176,085	134	7,526	3,137	183,611
Residential real estate			1,126	104,414	—	1,217	1,126	105,631
Consumer installment			103	12,219	—	—	103	12,219
	Total	$	6,460	387,891	263	10,535	6,723	398,426

December 31, 2011:
Commercial and industrial			$	948	54,772	—	216	948	54,988
Construction and land development				1,323	34,719	147	5,095	1,470	39,814
Commercial real estate				2,201	158,053	808	4,382	3,009	162,435
Residential real estate				1,097	100,432	266	1,293	1,363	101,725
Consumer installment				129	11,454	—	—	129	11,454
		Total	$	5,698	359,430	1,221	10,986	6,919	370,416

(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:

(In thousands)				Pass	Special Mention	Substandard Accruing	Nonaccrual		Total loans
December 31, 2012
Commercial and industrial			$	58,487	224	563	60	$	59,334
Construction and land development				34,490	310	1,125	1,706		37,631
Commercial real estate:
	Owner occupied			59,270	2,528	1,525	1,045		64,368
	Other			111,719	653	1,202	5,669		119,243
		Total commercial real estate		170,989	3,181	2,727	6,714		183,611
Residential real estate:
	Consumer mortgage			49,462	1,544	5,775	1,306		58,087
	Investment property			43,559	1,033	2,203	749		47,544
		Total residential real estate		93,021	2,577	7,978	2,055		105,631
Consumer installment				11,850	155	214	—		12,219
		Total	$	368,837	6,447	12,607	10,535	$	398,426

December 31, 2011
Commercial and industrial			$	52,834	1,359	719	76	$	54,988
Construction and land development				33,373	266	1,080	5,095		39,814
Commercial real estate:
	Owner occupied			62,543	4,951	1,057	1,651		70,202
	Other			81,584	622	8,221	1,806		92,233
		Total commercial real estate		144,127	5,573	9,278	3,457		162,435
Residential real estate:
	Consumer mortgage			50,156	1,575	5,279	948		57,958
	Investment property			38,732	2,225	2,032	778		43,767
		Total residential real estate		88,888	3,800	7,311	1,726		101,725
Consumer installment				11,078	248	128	—		11,454
		Total	$	330,300	11,246	18,516	10,354	$	370,416

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 December 31, 2012 and 2011.


				December 31, 2012
(In thousands)				Unpaid principal balance (1)	Charge-offs and payments applied (2)	Recorded investment (3)		Related allowance
With no allowance recorded:
Commercial and industrial			$	169	—	169
Construction and land development				2,879	(1,682)	1,197
Commercial real estate:
	Owner occupied			787	(212)	575
	Other			7,914	(1,862)	6,052
		Total commercial real estate		8,701	(2,074)	6,627
Residential real estate:
	Consumer mortgages			971	(152)	819
	Investment property			508	(110)	398
		Total residential real estate		1,479	(262)	1,217
		Total	$	13,228	(4,018)	9,210
With allowance recorded:
Construction and land development				471	(45)	426		129
Commercial real estate:
	Owner occupied			899	—	899		134
		Total commercial real estate		899	—	899		134
Residential real estate:
		Total	$	1,370	(45)	1,325	$	263
		Total impaired loans	$	14,598	(4,063)	10,535	$	263

(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, 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			$	216	—	216
Construction and land development				3,958	(1,572)	2,386
Commercial real estate:
	Owner occupied			361	(11)	350
	Other			655	(50)	605
		Total commercial real estate		1,016	(61)	955
Residential real estate:
		Total	$	5,190	(1,633)	3,557
With allowance recorded:
Construction and land development				2,882	(173)	2,709		147
Commercial real estate:
	Owner occupied			2,255	(29)	2,226		544
	Other			1,242	(41)	1,201		264
		Total commercial real estate		3,497	(70)	3,427		808
Residential real estate:
	Consumer mortgages			1,707	(797)	910		103
	Investment property			390	(7)	383		163
		Total residential real estate		2,097	(804)	1,293		266
		Total	$	8,476	(1,047)	7,429	$	1,221
		Total impaired loans	$	13,666	(2,680)	10,986	$	1,221

(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.

				Year ended December 31, 2012			Year ended December 31, 2011
				Average	Total interest		Average	Total interest
				recorded	income		recorded	income
(In thousands)				investment	recognized		investment	recognized
Impaired loans:
Commercial and industrial			$	194	13	$	316	9
Construction and land development				3,888	—		4,136	—
Commercial real estate:
	Owner occupied			2,449	64		1,828	24
	Other			2,621	—		2,374	—
		Total commercial real estate		5,070	64		4,202	24
Residential real estate:
	Consumer mortgages			861	—		1,376	—
	Investment property			652	—		146	—
		Total residential real estate		1,513	—		1,522	—
		Total	$	10,665	77	$	10,176	33

For the year ended December 31, 2010, the average recorded investment in impaired loans was $9.2 million. Total interest income recognized on impaired loans for the year ended December 31, 2010 was not material.

Impaired loans also include TDRs. In the normal course of business, management may grant concessions to borrowers who 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, the Company 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 restructuring.

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 individually, including those that have payment defaults, for possible impairment.

The following is a summary of accruing and nonaccrual TDRs and the related loan losses, by portfolio segment and class.

				TDRs
								Related
(In thousands)				Accruing	Nonaccrual	Total		Allowance
December 31, 2012
Commercial and industrial			$	169	—	169	$	—
Construction and land development				—	1,623	1,623		129
Commercial real estate:
	Owner occupied			899	1,045	1,944		134
	Other			—	432	432		—
		Total commercial real estate		899	1,477	2,376		134
Residential real estate:
	Consumer mortgages			—	819	819		—
	Investment property			—	188	188		—
		Total residential real estate		—	1,007	1,007		—
		Total	$	1,068	4,107	5,175	$	263

December 31, 2011
Commercial and industrial			$	216	—	216	$	—
Construction and land development				—	5,095	5,095		147
Commercial real estate:
	Owner occupied			925	1,172	2,097		420
	Other			—	1,806	1,806		264
		Total commercial real estate		925	2,978	3,903		684
Residential real estate:
	Investment property			—	383	383		163
		Total residential real estate		—	383	383		163
		Total	$	1,141	8,456	9,597	$	994

At December 31, 2012, there were no significant outstanding commitments to advance additional funds to customers whose loans had been restructured.

The following table summarizes loans modified in a TDR during the respective periods both before and after modification.

			Year ended December 31, 2012				Year ended December 31, 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			—	$	—	—	2	$	791	523
Construction and land development			4		5,419	4,305	3		4,925	4,894
Commercial real estate:
	Owner occupied		4		3,167	2,225	5		3,127	2,840
	Other		2		1,803	1,657	1		1,229	1,229
		Total commercial real estate	6		4,970	3,882	6		4,356	4,069
Residential real estate:
	Consumer mortgages		2		863	858	—		—	—
	Investment property		2		567	563	1		391	391
		Total residential real estate	4		1,430	1,421	1		391	391
		Total	14	$	11,819	9,608	12	$	10,463	9,877

The majority of the loans modified in a TDR during the years ended December 31, 2012 and 2011, respectively, 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.

For the year ended December 31, 2012, decreases in the post modification outstanding recorded investment were primarily due to principal payments made by borrowers at the date of modification for construction and land development loans and A/B note restructurings for two owner occupied commercial real estate loans. In certain circumstances, the Company may require the borrower to reduce the principal balance in order to grant an extension or renewal of the loan. Total charge-offs related to B notes were $0.9 million for the year ended December 31, 2012.

For the year ended December 31, 2011, decreases in the post modification outstanding recorded investment were primarily due to two A/B note restructurings, where the B note was charged off. Total charge-offs related to B notes during the year ended 2011 were approximately $0.6 million.

The following table summarizes the recorded investment in loans modified in a TDR within the previous twelve months for which there was a payment default (defined as 90 days or more past due) during the respective periods.

			Year ended December 31, 2012			Year ended December 31, 2011
			Number of		Recorded	Number of		Recorded
($ in thousands)			Contracts		investment	Contracts		investment
TDRs:
Construction and land development			1	$	2,386	—	$	—
Commercial real estate:
	Owner occupied		—		—	2		1,172
	Other		—		—	1		1,201
		Total commercial real estate	—		—	3		2,373
Residential real estate:
		Total	1		2,386	3		2,373