Income Taxes

12 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 11. Income Taxes

The company files income tax returns in the U. S. Federal jurisdiction and the state of West Virginia. 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.

Net deferred tax assets (in thousands) consist of the following components as of December 31, 2011 and 2010:

	2011		2010
Deferred tax assets:
Reserve for loan losses	$	949	$	1 245
Accrued pension expense		823		530
Accrued postretirement benefits		178		255
Nonaccrual interest		83		36
Stock option expense		35		35
Home equity closing costs		11		23
Net loan origination fees		102		69
Securities available for sale		- -		52
Net operating loss carryforward		553		- -
OREO expense		240		138
OREO valuation allowance		835		32
OREO built in gain		280		250
	$	4 089	$	2 665
Deferred tax liabilities:
Depreciation	$	84	$	89
Securities available for sale		105		- -
	$	189	$	89
Net deferred tax assets	$	3 900	$	2 576

The (benefit) provision for income taxes charged to operations for the years ended December 31, 2011, 2010 and 2009 consists of the following (in thousands):

	2011			2010		2009
Current tax (benefit) expense	$	(53	)	$	186	$	(827	)
Deferred tax (benefit) expense		(1 197	)		494		(609	)
	$	(1 250	)	$	680	$	(1 436	)

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income for the years ended December 31, 2011, 2010 and 2009 due to the following (in thousands):

	2011			2010			2009
Computed “expected” tax (benefit) expense	$	(768	)	$	841		$	(1 250	)
Increase (decrease) in income taxes resulting from:
Tax exempt income		(168	)		(165	)		(146	)
State income tax (benefit) expense		(250	)		- -			(163	)
Other		(64	)		4			123
	$	(1 250	)	$	680		$	(1 436	)

The realization of deferred income tax assets is assessed and a valuation allowance is recorded if it is “more likely than not” that all or a portion of the deferred tax asset will not be realized. “More likely than not” is defined as greater than a 50% chance. Management considers all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is needed. Management’s assessment is primarily dependent on historical taxable income and projections of future taxable income, which are directly related to the company’s core earnings capacity and its prospects to generate core earnings in the future. Projections of core earnings and taxable income are inherently subject to uncertainty and estimates that may change given the uncertain economic outlook, banking industry conditions and other factors. Based upon an analysis of available evidence, management has determined that it is “more likely than not” that the company’s deferred income tax assets as of December 31, 2011 will be fully realized and therefore no valuation allowance to the company’s deferred income tax assets was recorded. However, the company can give no assurance that in the future its deferred income tax assets will not be impaired because such determination is based on projections of future earnings and the possible effect of certain transactions, which are subject to uncertainty and based on estimates that may change due to changing economic conditions and other factors. Due to the uncertainty of estimates and projections, it is possible that the company will be required to record adjustments to the valuation allowance in future reporting periods.

Under the provisions of the Internal Revenue Code, the Company has approximately $697,168 of net operating loss carryforwards which can be offset against future taxable income. The carryforwards expire through December 31, 2031. In addition, the Company has approximately $3,958,316 of net operating loss carryforwards which can be offset against future West Virginia taxable income. These carryforwards also expire through December 31, 2031. The full realization of the tax benefits associated with the carryforwards depends predominately upon the recognition of ordinary income during the carryforward period.