Income Tax

12 Months Ended

Dec. 31, 2011

Income Tax

Note 14: Income Tax

	2011			2010			2009
Income tax expense
Currently payable
Federal	$	423		$	707		$	(1,270	)
State		(6	)		540			9
Deferred
Federal		(94	)		969			1,481
State		6			(540	)		(9	)
Total income tax expense	$	329		$	1,676		$	211
Reconciliation of federal statutory to actual tax expense
Federal statutory income tax at 34%	$	1,297		$	2,797		$	1,147
Low income housing credits		(445	)		(592	)		(874	)
Tax-exempt income		(615	)		(723	)		(733	)
Other-than-temporary-impairment, securities		—			—			615
Other		92			194			56
Actual tax expense	$	329		$	1,676		$	211
Effective tax rate		8.63	%		20.37	%		6.25	%

The components of the deferred asset included on the consolidated balance sheets were as follows:

	2011			2010
Assets
Unrealized loss on securities available for sale	$	—		$	1,970
Allowance for loan losses		7,245			6,902
Deferred compensation		3,090			2,992
Business tax and AMT credit carryovers		7,841			7,188
Capital loss carryover		832			1,502
Net operating loss carryover		2,582			1,839
Goodwill impairment		4,012			4,408
Other		2,150			2,283
Total assets		27,752			29,084
Liabilities
Unrealized gain on securities available for sale		(886	)		—
Depreciation and amortization		(1,554	)		(1,582	)
FHLB stock		(564	)		(650	)
State income tax		(1,351	)		(1,335	)
Loan fees		(511	)		(502	)
Investments in limited partnerships		(2,258	)		(2,079	)
Mortgage servicing rights		(1,073	)		(1,344	)
Other		(334	)		(227	)
Total liabilities		(8,531	)		(7,719	)
Valuation Allowance
Beginning balance		(1,335	)		(1,335	)
Increase during period		(500	)		—
Ending balance		(1,835	)		(1,335	)
Net deferred tax asset	$	17,386		$	20,030

The Company has unused business income tax credits of $6,659,000 that begin to expire in 2024. In addition, the Company has an AMT credit carryover of $1,182,000 with an unlimited carryover period.

Retained earnings include approximately $14,743,000 for which no deferred income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions as of December 31, 1987 for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which income would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amounts was approximately $5,013,000.

The Company’s federal and state income tax returns have been closed without audit by the IRS through the year ended December 31, 2007.