Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 13
Income Taxes

The components of income tax expense (benefit) are as follows:

	For the Years Ended December 31,
(In thousands)	2012		2011		2010
Current:
Federal	$	6,195	$	5,372	$	5,435
State		718		980		920
Deferred:
Federal		933		1,983		1,178
State		41		162		90
Total income tax expense	$	7,887	$	8,497	$	7,623

A reconciliation of expected income tax expense (benefit), computed by applying the effective federal statutory rate of 35% for each of 2012, 2011 and 2010 to income before income tax expense, to reported income tax expense is as follows:

	For the Years Ended December 31,
(In thousands)	2012			2011			2010
Expected income tax expense	$	10,917		$	11,027		$	9,777
(Reductions) increases resulting from:
Tax-exempt income		(3,633	)		(3,760	)		(3,273	)
State taxes, net of federal benefit		493			742			657
Other, net		110			488			462
Total income tax expense	$	7,887		$	8,497		$	7,623

The tax effects of temporary differences which give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

	December 31,
(In thousands)	2012			2011
Deferred tax assets:
Allowance for loan losses	$	4,599		$	4,912
ASC 715 pension funding liability		11,744			9,679
Net operating loss carryforward1		341			384
Stock compensation		139			834
Supplemental executive retirement plan accrual		829			634
Other		488			454
Total deferred tax assets	$	18,140		$	16,897
Deferred tax liabilities:
Premises and equipment		(863	)		(440	)
Pension		(6,081	)		(7,327	)
Intangible/assets		(867	)		(752	)
Unrealized gain on investment in securities available-for-sale		(6,947	)		(6,922	)
Other		(298	)		(315	)
Total deferred tax liabilities	$	(15,056	)	$	(15,756	)
Net deferred tax assets	$	3,084		$	1,141

¹ As of December 31, 2012, the Company had approximately $975,000 of net operating loss carry forwards as a result of the acquisition of Franklin Bancorp. The utilization of the net operating loss carry forward is subject to Section 382 of the Internal Revenue Code and limits the Company’s use to approximately $122,000 per year during the carry forward period, which expires in 2020.

A valuation allowance would be provided on deferred tax assets when it is more likely than not that some portion of the assets will not be realized. The Company has not established a valuation allowance at December 31, 2012 or 2011, due to management’s belief that all criteria for recognition have been met, including the existence of a history of taxes paid sufficient to support the realization of deferred tax assets.

The reconciliation of the beginning unrecognized tax benefits balance to the ending balance is presented in the following table:

(In thousands)	2012			2011			2010
Balance at January 1	$	2,069		$	1,877		$	1,750
Changes in unrecognized tax benefits as a result of tax
positions taken during a prior year		(140	)		287			560
Changes in unrecognized tax benefits as a result of tax
position taken during the current year		419			475			555
Decreases in unrecognized tax benefits relating to
settlements with taxing authorities		—			—			(466	)
Reductions to unrecognized tax benefits as a result of a
lapse of the applicable statute of limitations		(463	)		(570	)		(522	)
Balance at December 31	$	1,885		$	2,069		$	1,877

At December 31, 2012, 2011 and 2010, the balance of the Company’s unrecognized tax benefits which would, if recognized, affect the Company’s effective tax rate was $1,357,000, $1,496,000 and $1,465,000, respectively. These amounts are net of the offsetting benefits from other taxing jurisdictions.

As of December 31, 2012, 2011 and 2010, the Company had $89,000, $95,000 and $106,000, respectively, in accrued interest related to unrecognized tax benefits. During 2012 and 2011, the Company recorded a net reduction in accrued interest of $6,000 and $11,000, respectively, as a result of settlements with taxing authorities and other prior-year adjustments.

The Company believes it is reasonably possible that the total amount of tax benefits will decrease by approximately $538,000 over the next 12 months. The reduction primarily relates to the anticipated lapse in the statute of limitations. The unrecognized tax benefits relate primarily to apportionment of taxable income among various state tax jurisdictions.

The Company is subject to income tax in the U. S. federal jurisdiction, numerous state jurisdictions, and a foreign jurisdiction. The Company’s federal income tax returns for tax years 2009 through 2011 remain subject to examination by the Internal Revenue Service. In addition, the Company is subject to state tax examinations for the tax years 2008 through 2011.