Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

Note 14 – Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and the states of Virginia and North Carolina.  With few exceptions, the Company is no longer subject to U.S. federal, state, and local income tax examinations by tax authorities for years prior to 2008.

The components of the Company's net deferred tax assets (liabilities) were as follows:

(in thousands)	December 31,
	2011		2010
Deferred tax assets:
Allowance for loan losses	$	3,685	$	2,947
Nonaccrual loan interest		306		168
Other real estate owned expense		190		84
Other real estate owned valuation allowance		3,034		568
Deferred compensation		752		194
Allowance for off balance sheet items		70		76
Loans		9,674		74
Other		1,413		44
Total deferred tax assets		19,124		4,155

Deferred tax liabilities:
Depreciation		1,102		1,176
Accretion of discounts on securities		117		67
Core deposit intangibles		2,308		432
Net unrealized gains on securities		4,756		688
Prepaid pension expense		481		838
Pension liability		1,078		773
Trust preferred fair value adjustment		760		-
Other		551		95
Total deferred tax liabilities		11,153		4,069
Net deferred tax assets (liabilities)	$	7,971	$	86

The provision for income taxes consists of the following:

(in thousands)	Years Ended December 31,
	2011		2010		2009
Taxes currently payable	$	1,857	$	3,125	$	2,393
Deferred tax expense		3,053		56		132
	$	4,910	$	3,181	$	2,525

The effective tax rates differ from the statutory federal income tax rates due to the following items:

	Years Ended December 31,
	2011			2010			2009
Federal statutory rate		35.0	%		34.0	%		34.0	%
Nontaxable interest income		(7.4	)		(6.4	)		(6.3	)
Other		2.2			(0.2	)		(0.7	)
Effective rate		29.8	%		27.8	%		27.0	%