Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

(13)    Income Taxes

The provision for income taxes consists of the following:

	Year Ended December 31,
	2011			2010		2009
	(Dollars in thousands)
Income Taxes:
Federal current expense (benefit)	$	1,199		$	757	$	(90	)
Federal deferred expense (benefit)		(43	)		469		(2,578	)
Total Income Tax (Benefit)	$	1,156		$	1,226	$	(2,668	)

The following presents a reconciliation of income taxes as shown on the Consolidated Statements of Income with that which would be computed by applying the statutory Federal tax rate of 34% to income (loss) before taxes in 2011, 2010 and 2009.

	Year Ended December 31,
	2011			2010			2009
	(Dollars in thousands)
Computed “expected” tax expense (benefit)	$	2,094		$	2,241		$	(1,587	)
Increase (reduction) in income taxes resulting from:
Tax exempt interest on obligations of state and political subdivisions		(404	)		(371	)		(386	)
Tax exempt interest on bank owned life insurance		(203	)		(199	)		(236	)
New markets tax credit		(270	)		(536	)		(530	)
Other, net		(62	)		92			71
Total Income Taxes (Benefit)	$	1,156		$	1,226		$	(2,668	)

Management monitors changes in tax statutes and regulations and the issuance of judicial decisions to determine the potential impact to uncertain income tax positions. During 2011 and 2010 there were no material uncertain income tax positions. At December 31, 2011 and December 31, 2010, the Corporation had no unrecognized tax benefits recorded. The Corporation does not expect the amount of unrecognized tax benefits to significantly change within the next twelve months.

Net deferred Federal tax assets are included in other assets on the consolidated Balance Sheets. Management believes that it is more likely than not that the deferred Federal tax assets will be realized. At December 31, 2011 and 2010 there was no valuation allowance required. The tax effects of temporary differences that give rise to significant portions of the deferred Federal tax assets and deferred Federal tax liabilities are presented below.

	At December 31
	2011			2010
	(Dollars in thousands)
Deferred Federal tax assets:
Allowance for loan losses	$	5,802		$	5,486
Deferred compensation		210			263
Minimum pension liability		937			758
Equity based compensation		186			90
Accrued loan fees and costs		413			431
New Market Tax Credit and AMT Credit Carryforward		887			1,066
Mark-to-market adjustments		27			65
Other deferred tax assets		890			1,014
Total deferred Federal tax assets	$	9,352		$	9,173
Deferred Federal tax liabilities:
Bank premises and equipment depreciation	$	(56	)	$	(106	)
Net unrealized gain on securities available for sale		(2,070	)		(1,792	)
FHLB stock dividends		(254	)		(254	)
Intangible asset amortization		(1,077	)		(1,052	)
Accretion		(226	)		(193	)
Deferred charges		(212	)		(303	)
Prepaid pension		(804	)		(763	)
Other deferred tax liabilities		(314	)		(315	)
Total deferred Federal tax liabilities		(5,013	)		(4,778	)
Net deferred Federal tax assets	$	4,339		$	4,395

The Corporation’s income tax returns are subject to review and examination by federal and state taxing authorities. The Corporation is no longer subject to examination by the federal taxing authority for years prior to 2009. Tax years 2009 and later remain open to examination by the federal taxing authority.