Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Summary of Income Tax Expense Benefits

Income tax expense (benefit) was as follows:

	2012			2011
	(In thousands)
Current
Federal	$	(29	)	$	(2,261	)
State		8			(192	)
Deferred
Federal		431			(1,732	)
State		(282	)		(1,694	)
Change in valuation allowance		701			7,721
Total	$	829		$	1,842

Effective Tax Rates

Effective tax rates differ from the federal statutory rate of 34% applied to earnings before income taxes due to the following:

	2012			2011
	(In thousands)
Federal statutory rate times financial statement income (loss)	$	482		$	(4,221	)
Effect of:
State taxes, net of federal benefit		104			(885	)
Enterprise zone net interest deduction		(356	)		(428	)
Earnings from bank owned life insurance		(32	)		(36	)
Low income housing credits		(167	)		(388	)
Change in valuation allowance		701			7,721
Other, net		97			79
Total	$	829		$	1,842

Summary of Deferred Tax Assets and Liabilities

Year-end deferred tax assets and liabilities were due to the following:

	2012		2011
	(In thousands)
Deferred tax assets:
Allowance for loan losses	$	3,235	$	5,633
Accrued liabilities		191		181
State income taxes		40		39
Deferred compensation		404		339
Stock compensation		251		218
Real estate owned		623		0
Unrealized gain/loss on loans held for sale		131		183
Net operating loss carryforward		5,767		4,847
Non-accrual loan interest		501		637
Basis difference on fixed assets		117		101
Partnership investment		0		10
General business credit		470		332
Alternative minimum tax credit		113		119
Other		29		2
Total deferred tax assets		11,872		12,641

Deferred tax liabilities:
Deferred loan fees/costs		(1,754	)		(1,878	)
Real estate owned		(0	)		(465	)
Net unrealized appreciation on available-for-sale securities		(295	)		(400	)
FHLB stock dividends		(644	)		(644	)
Mortgage servicing rights		(58	)		(149	)
Partnership investment		(5	)		0
Prepaid expenses		(82	)		(27	)
Total deferred tax liabilities		(2,838	)		(3,563	)
Valuation allowance		(9,034	)		(8,228	)
Net deferred tax assets	$	0		$	850

Reconciliation of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2012		2011
	(In thousands)
Balance at beginning of year	$	323	$	214
Additions based on tax positions related to the current year		108		108
Additions for tax positions of prior year		0		1
Reductions for tax positions of prior years		0		0
Settlements		0		0
Balance at end of year	$	431	$	323