The components of the provision (benefit) for income taxes are as follows:

	2011			2010			2009
Current	$	376		$	2,031		$	1,727
Deferred		4,099			2,041			1,327
Change in valuation allowance		(675	)		(255	)		(120	)
Provision for income taxes	$	3,800		$	3,817		$	2,934

The Company's deferred tax assets and liabilities at December 31 are shown below.

	2011			2010
Deferred tax assets
Allowance for loan losses	$	3,497		$	3,228
Purchase accounting adjustments		5,470			8,569
Net operating loss carryforward		2,076			2,495
Write-downs of other real estate owned		424			168
Taxable income on non-accrual loans		841			1,232
Security writedown		253			289
Unrealized loss on investment securities		-			739
Accrued expenses		157			150
Other		22			17
Total deferred tax assets		12,740			16,887

Deferred tax liabilities
Amortization of intangibles	$	(4,052	)	$	(3,527	)
Depreciation		(1,009	)		(1,077	)
Federal Home Loan Bank dividends		(382	)		(370	)
Deferred loan fees		(450	)		(297	)
Unrealized gain on investment securities		(2,583	)		-
Other		(267	)		(198	)
Total deferred tax liabilities		(8,743	)		(5,469	)

Valuation allowance on deferred tax assets		-			(675	)
Net deferred taxes	$	3,997		$	10,743

At December 31, 2011 the Company had federal net operating loss carryforwards of $3,714 and various state net operating loss carryforwards of $14,961 which begin to expire in 2022. The deductibility of these net operating losses is limited under IRC Sec. 382.

A valuation allowance for deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability of the Company to generate sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

Due to statutory law changes and a change in expectations of future taxable income, the Company reversed a valuation allowance against its District of Columbia net operating loss carryforward in 2011. Due to a change in expectations of future taxable income, the Company reversed a valuation allowance against its West Virginia net operating loss carryforward in 2010.

An analysis of the differences between the effective tax rates and the statutory U.S. federal income tax rate is as follows:

	2011					2010					2009
U.S. federal income tax rate	$	3,729		34.0	%	$	4,416		34.0	%	$	4,098		34.0	%
Changes from the statutory rate
State income taxes, net		208		1.9			239		1.9			-		-
Bargain purchase gain recorded on tax-exempt acquisition		-		-			-		-			(1,208	)	(10.0	)
Change in valuation allowance, net		(675	)	(6.1	)		(255	)	(2.0	)		-		-
Tax-exempt interest income		(194	)	(1.8	)		(209	)	(1.6	)		(165	)	(1.4	)
Non-deductible interest expense related to carrying tax-exempt interest earning assets		8		0.1			11		0.1			12		0.1
Non-deductible stock compensation expense		36		0.3			18		0.1			17		0.1
State deferred rate change, net		1,012		9.2			(377	)	(2.9	)		-		-
Non-deductible acquisition expenses		-		-			-		-			172		1.4
Tax credits, net		(49	)	(0.4	)		(49	)	(0.4	)		(49	)	(0.4	)
Other		(275	)	(2.5	)		23		0.2			57		0.5
	$	3,800		34.7	%	$	3,817		29.4	%	$	2,934		24.3	%

Unrecognized Tax Benefits: The Company does not have any beginning or ending unrecognized tax benefits. The Company does not expect the total amount of unrecognized tax benefits to significantly increase in the next twelve months. There were no interest and penalties recorded in the income statement or accrued for the year ended December 31, 2011, 2010 and 2009 related to unrecognized tax benefits.

The Company and its subsidiaries file a consolidated U.S. Corporation income tax return and a combined return in the state of West Virginia and the District of Columbia. The Company also files a corporate income tax return in the state of Kentucky. The Company is no longer subject to examination by taxing authorities for years before 2008. A federal examination of the tax years 2001 - 2003 was completed in 2005 with no material adjustments.