Note 11 — Income Taxes

The current and deferred amounts of income tax expense for the years ended December 31, 2011, 2010 and 2009, respectively, are as follows:


	2011		2010			2009
	(Dollars in Thousands)
Current:
Federal	$	3,818	$	(27	)	$	(19	)
State		187		198			146
Subtotal		4,005		171			127
Deferred:
Federal		2,157		(191	)		824
State		1,249		242			(5	)
Subtotal		3,406		51			819
Income tax expense	$	7,411	$	222		$	946

Reconciliation between the amount of reported income tax expense and the amount computed by applying the statutory Federal income tax rate is as follows:


	2011			2010			2009
	(Dollars in Thousands)
Income before income tax expense	$	21,337		$	7,226		$	4,717
Federal statutory rate		35	%		34	%		34	%
Computed "expected" Federal income tax expense		7,468			2,457			1,604
State tax, net of Federal tax benefit		933			291			93
Bank owned life insurance		(363	)		(417	)		(393	)
Tax-exempt interest and dividends		(595	)		(75	)		(334	)
Tax on Bank Owned Life Insurance policy surrender gain		—			539			—
Reversal of unrealized tax benefit & interest		—			(2,551	)		—
Other, net		(32	)		(22	)		(24	)
Income tax	$	7,411		$	222		$	946

The tax effects of temporary differences that give rise to significant portions of the deferred tax asset and deferred tax liability at December 31, 2011 and 2010 are presented in the following table:


	2011		2010
	(Dollars in Thousands)
Deferred tax assets:
Impaired assets	$	2,820	$	2,621
Allowance for loan losses		3,810		3,358
Employee benefit plans		13		59
Unrealized losses on securities available-for-sale		1,154		3,462
Pension actuarial losses		2,150		1,566
Other		512		656
Federal AMT Credits		854		3,874
NJ NOL		373		1,258
NJ AMA credits		210		213
Total deferred tax assets	$	11,896	$	17,067
Deferred tax liabilities:
Depreciation	$	303	$	298
Market discount accretion		43		29
Deferred loan costs, net of fees		397		435
Purchase accounting		40		62
Total deferred tax liabilities		783		824
Net deferred tax asset	$	11,113	$	16,243

Based on the Corporation's historical and current taxable income and the projected future taxable income, management believes it is more likely than not that the Corporation will realize the benefit of the net deductible temporary differences existing at December 31, 2011 and 2010, respectively.

At December 31, 2011, the Corporation has no federal income tax loss carry forwards, and has state income tax loss carry forwards of approximately $6.4 million, which have expirations beginning in the year 2014.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, the projected future taxable income, and tax planning strategies in making this assessment. During 2011 and 2010, based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, the Corporation believes the net deferred tax assets are more likely than not to be realized.

The Corporation's federal income tax returns are open and subject to examination from the 2008 tax return year and forward. The Corporation's state income tax returns are generally open from the 2007 and later tax return years based on individual state statute of limitations.