INCOME TAXES

The components of the income tax expense (benefit) for the years ended December 31, 2011 and 2010, were as follows:



(Dollars in thousands)	2011			2010

Income tax expense (benefit):
Current	$	(109	)	$	318
Deferred	250			(229		)

Total	$	141		$	89

A reconciliation of reported income tax expense for the years ended December 31, 2011 and 2010, to the amount of tax expense

computed by multiplying income before income taxes by the statutory federal income tax rate follows:



(Dollars in thousands)	2011			2010

Statutory federal income tax rate	34%			34%

Tax expense (benefit) at statutory rate	$	254		$	307
Increase (decrease) in income taxes resulting from:
State income taxes net of federal tax benefit	19			41
Tax exempt interest income	(92		)	(102		)
Disallowed interest expense	2			3
Cash surrender value of life insurance	(67		)	(68		)
Other	25			(92		)

Total	$	141		$	89

The tax effect of the cumulative temporary differences and carry forwards that gave rise to the deferred tax assets and liabilities as of December 31, 2011 and 2010 within the Consolidated Balance Sheets were as follows:



	December 31,
(Dollars in thousands)	2011			2010

Deferred tax assets:
Accrued pension expense	$	482		$	660
Adjustments, defined benefits plans	1,204			876
Deferred loan fees	52			58
Excess book over tax provision for loan losses expense	1,494			1,498
Federal net operating loss carryforward	300			300
State net operating loss carryforward	199			189
Impairment on investments	74			77
OREO write-downs	158			189
Deferred gain on sale of other real estate owned	21			20
Premises and equipment	243			272
Alternative minimum tax	319			242
Other, net	58			62
Total deferred tax assets	4,604			4,443
Valuation allowance for deferred tax assets	(199		)	(189		)
Net of valuation allowance deferred tax assets	4,405			4,254
Deferred tax liabilities:
Mark to market adjustment- loans	(59		)	(119		)
Unrealized gains on securities available for sale	(150		)	(55		)
Other	(133		)	—
Total deferred tax liabilities	(342		)	(174		)
Net deferred tax assets	4,063			4,080
Taxes receivable, net	640			354
Deferred tax assets and taxes receivable, net	$	4,703		$	4,434

The Company has federal net operating loss carry-forwards of approximately $0.9 million at December 31, 2011, which can be used to offset future taxable income, subject to certain Section 382 limitations. The federal loss carry-forwards start to expire in 2027. The Company’s state net operating losses contain amounts which the Company determined do not meet the “more likely than not” threshold for recognition. Accordingly, a valuation allowance has been established for the state loss carry-forward amounts. Currently, the Company has concluded any Internal Revenue Service audit of its taxes. The 2006 tax year was the last year audited.