Income Taxes

The reported income tax expense and effective tax rate in the Consolidated Statements of Income differs from the amounts computed by applying the statutory corporate tax rate as follows for the years ended December 31:



	2011					2010					2009
(Dollars in thousands)	Amount			Rate		Amount			Rate		Amount			Rate
Income tax computed at statutory federal tax rate	$	5,890		34.3	%	$	1,956		34.0	%	$	1,063		34.0	%
Differences in rate resulting from:
Tax-exempt interest income	(574		)	(3.4	)%	(808		)	(14.1	)%	(921		)	(29.5	)%
Investments in tax credit funds	(497		)	(2.9	)%	(715		)	(12.4	)%	(625		)	(20.0	)%
Bank owned life insurance	(44		)	(0.3	)%	(207		)	(3.6	)%	(357		)	(11.4	)%
Other, net	(179		)	(0.9	)%	(54		)	(0.9	)%	(224		)	(7.2	)%
Total income tax expense (benefit)	$	4,596		26.8	%	$	172		3.0	%	$	(1,064	)	(34.1	)%

Peoples' reported income tax expense consisted of the following for the years ended December 31:



(Dollars in thousands)	2011		2010			2009
Current income tax	$	4,134	$	1,986		$	4,148
Deferred income tax	462		(1,814		)	(5,212		)
Total income tax expense (benefit)	$	4,596	$	172		$	(1,064	)

The significant components of Peoples' deferred tax assets and liabilities consisted of the following at December 31:



(Dollars in thousands)	2011		2010
Deferred tax assets:
Allowance for loan losses	$	8,833	$	9,960
Accrued employee benefits	3,026		946
Available-for-sale securities	—		1,098
Investments	2,601		2,607
Tax credit carryforward	6,412		6,096
Other	277		311
Total deferred tax assets	$	21,149	$	21,018
Deferred tax liabilities:
Bank premises and equipment	1,478		1,386
Deferred income	1,026		1,110
Deferred net loan costs	372		338
Available-for-sale securities	4,005		—
Other	4,364		4,660
Total deferred tax liabilities	$	11,245	$	7,494
Net deferred tax asset	$	9,904	$	13,524

The tax credit carryforward at December 31, 2011 and 2010 may be carried over for a period of 20 years and will expire over the period of 2028 and 2031. No valuation allowance for deferred tax assets was required at December 31, 2011, as it is more likely than not that all of the deferred tax assets will be realized in future periods. The related federal income tax expense on securities transactions approximated $166,000 in 2011, $2,398,000 in 2010 and $506,000 in 2009.

Peoples' income tax returns are subject to review and examination by federal and state taxing authorities. Peoples is currently open to audit under the applicable statutes of limitations by the Internal Revenue Service for the years ended December 31, 2008 through 2010. The years open to examination by state taxing authorities vary by jurisdiction.