INCOME TAXES

12 Months Ended

Dec. 31, 2011

Income Taxes

INCOME TAXES

NOTE 16 INCOME TAXES

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

	2011			2010			2009
Current income tax provision:
Federal	$	1,915		$	1,688		$	1,244
State		606			600			440
Total current		2,521			2,288			1,684
Deferred income tax benefit:
Federal		(60	)		(220	)		(652	)
State		(40	)		(80	)		(150	)
Total deferred		(100	)		(300	)		(802	)
Total provision for income taxes	$	2,421		$	1,988		$	882

A summary of the source of differences between income taxes at the federal statutory rate and the provision for income taxes for the years ended December 31, follows:

	2011						2010						2009
				Percent						Percent						Percent
				of						of						of
				Pretax						Pretax						Pretax
	Amount			Income			Amount			Income			Amount			Income
Tax expense at statutory rate	$	2,627			34.0		$	2,292			34.0		$	1,359			34.0
Increase (decrease) in taxes resulting from:
Tax-exempt interest		(480	)		(6.2	)		(527	)		(7.8	)		(557	)		(13.9	)
Bank-owned life insurance		(141	)		(1.8	)		(139	)		(2.1	)		(140	)		(3.5	)
State income tax		374			4.8			343			5.1			191			4.8
Other		41			0.5			19			0.3			29			0.7
Provision for income taxes	$	2,421			31.3		$	1,988			29.5		$	882			22.1

Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of PSB’s assets and liabilities. The major components of the net deferred tax assets are as follows:

	2011			2010
Deferred tax assets:
Allowance for loan losses	$	3,129		$	3,136
Deferred compensation and directors’ fees		971			790
Investment securities		26			203
State net operating loss		150			150
Accrued interest receivable		89			204
Foreclosed assets		543			306
Interest rate swaps		225			10
Other		40			89
Valuation allowances		(150	)		(150	)
Gross deferred tax assets		5,023			4,738
Deferred tax liabilities:
Premises and equipment		669			685
Mortgage servicing rights		475			433
FHLB stock		326			326
Unrealized gain on securities available for sale		1,488			1,598
Deferred net loan origination costs		85			107
Prepaid expenses		243			287
Gross deferred tax liabilities		3,286			3,436
Net deferred tax asset	$	1,737		$	1,302

Prior to 2009, PSB paid state income taxes on individual, unconsolidated net earnings. At December 31, 2011, net operating loss carryforwards of the parent company of approximately $2.8 million existed to offset future state taxable income. These net operating losses will begin to expire in 2012. A valuation allowance has been recognized to adjust deferred tax assets to the amount of net operating losses expected to be utilized to offset future income. If realized, the tax benefit for this item will reduce current tax expense for that period. There was no change in the valuation allowance during 2011 and 2010.

At December 31, 2011, federal tax returns remained open for Internal Revenue Service (IRS) review for tax years after 2007, while state tax returns remain open for review by state taxing authorities for tax years after 2006. There were no federal or state income tax audits being conducted at December 31, 2011.