INCOME TAXES

12 Months Ended

Dec. 31, 2012

INCOME TAXES [Abstract]

INCOME TAXES

13. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities as of December 31, 2012 and 2011 are as follows (in thousands):

	2012		2011
Deferred tax assets:
Allowance for loan losses	$	6,325	$	2,474
Alternative minimum tax credit		1,300		1,158
Other		2,575		1,357
Total deferred tax assets		10,200		4,989
Deferred tax liabilities:
Premises and equipment		4,958		3,792
FHLB stock dividends		57		18
Unrealized gains on securities		5,914		3,993
Other		1,747		351
Total deferred tax liabilities		12,676		8,154
Net deferred tax liability	$	2,476	$	3,165

Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, we believe that it is more likely than not that we will realize the benefits of these deductible differences existing at December 31, 2012. Therefore, no valuation allowance is necessary at this time.  The net deferred tax liability is included in other liabilities on the consolidated balance sheets.

Components of income tax expense are as follows (in thousands):

	2012		2011			2010
Current	$	2,128	$	1,055		$	2,001
Deferred expense (benefit)		1,651		(491	)		(1,033	)
Total income tax expense	$	3,779	$	564		$	968

The provision for federal income taxes differs from the amount computed by applying the U.S. Federal income tax statutory rate of 35% for 2012 and 34% for 2011 and 2010 on pre-tax income as follows (in thousands):

	December 31,
	2012			2011			2010
Taxes calculated at statutory rate	$	4,697		$	1,713		$	2,294
Increase (decrease) resulting from:
Tax-exempt interest, net		(988	)		(1,121	)		(1,293	)
Tax credits		-			-			-
Other		70			(28	)		(33	)
	$	3,779		$	564		$	968

The Company's federal income tax returns are open and subject to examination from the 2009 tax return year and forward. The various state income and franchise tax returns are generally open from the 2009 and later tax return years based on individual state statutes of limitation. We are not currently under examination by federal or state tax authorities for the 2009, 2010, or 2011 tax years.