13. INCOME TAXES

The provision for income taxes included the following components at December 31, 2011, 2010 and 2009:


	2011		2010		2009
	(Dollars in thousands)
Current:
Federal	$	5,483	$	5,228	$	5,313
State		951		1,020		946
Foreign		2,490		420		699
Total		8,924		6,668		6,958
Deferred		(343)		503		(18	)
Total provision	$	8,581	$	7,171	$	6,940

The differences between the U.S. federal statutory income tax rate and the Company’s effective tax rate were as follows for the years ended December 31, 2011, 2010 and 2009:


	2011		2010			2009
U.S. federal statutory income tax rate		35.0%		35.0	%		35.0	%
State income taxes, net of federal tax benefit		2.5		3.1			3.1
Non-taxable municipal bond interest		(2.7)		(3.2	)		(3.1	)
Other		(0.5)		(1.2	)		(0.3	)
Effective tax rate		34.3%		33.7	%		34.7	%

The foreign component of pretax net earnings was $5.3 million, $3.8 million and $2.3 million for 2011, 2010 and 2009, respectively. As of December 31, 2011, the total amount of unremitted foreign earnings was $4.1 million. The repatriation of foreign earnings would not have a material impact on the Company’s financial statements.

The components of deferred taxes as of December 31, 2011 and 2010, were as follows:


	2011		2010
	(Dollars in thousands)
Deferred tax benefits:
Accounts receivable reserves	$	507	$	387
Pension liability		10,428		7,398
Accrued liabilities		1,727		1,437
		12,662		9,222
Deferred tax liabilities:
Inventory and related reserves		(964)		(1,847	)
Cash value of life insurance		(2,821)		(2,615	)
Property, plant and equipment		(1,516)		(843	)
Trademark		(2,827)		(2,078	)
Prepaid and other assets		(263)		(233	)
Foreign currency gains on intercompany loans		(448)		(744	)
		(8,839)		(8,360	)
Net deferred income tax benefits	$	3,823	$	862

The net deferred tax benefit is classified in the Consolidated Balance Sheets as follows:


	2011		2010
	(Dollars in thousands)
Current deferred income tax benefits (liabilities)	$	395	$	(228	)
Noncurrent deferred income tax benefits		3,428		1,090
	$	3,823	$	862

Uncertain Tax Positions

The Company accounts for its uncertain tax positions in accordance with ASC 740, Income Taxes (“ASC 740”). ASC 740 provides that the tax effects from an uncertain tax position can be recognized in the Company’s consolidated financial statements only if the position is more likely than not of being sustained on audit, based on the technical merits of the position.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:


(Dollars in thousands)
Balance at December 31, 2008	$	375
Increases related to current year tax positions		92
Expiration of the statute of limitations for the assessment of taxes		(18	)
Balance at December 31, 2009	$	449
Increases related to current year tax positions		9
Expiration of the statute of limitations for the assessment of taxes		(23	)
Favorable settlements of tax positions		(351	)
Balance at December 31, 2010	$	84
Expiration of the statute of limitations for the assessment of taxes		(84	)
Balance at December 31, 2011	$	—

The Company had no unrecognized tax benefits as of December 31, 2011. At December 31, 2010, the Company had unrecognized tax benefits of $84,000 which, if recognized, would reduce the Company’s annual effective tax rate. The Company reduced its accrual for potential interest and penalties related to those unrecognized tax benefits by $57,000 during 2010. Included in the Consolidated Balance Sheet at December 31, 2010 was a liability for potential penalties and interest of $7,000 and $7,000, respectively.

The Company files a U.S. federal income tax return, various U.S. state income tax returns and several foreign returns. In general, the 2007 through 2011 tax years remain subject to examination by those taxing authorities.