(10)	Income Taxes

The provision (benefit) for income tax expense consists of the following for the years ended December 31:

	2011		2010			2009
Current:
Federal	$	210	$	(60	)	$	(1,683	)
State		2		12			155

		212		(48	)		(1,528	)
Deferred:
Federal		500		(87	)		(566	)
State		420		142			(750	)

		920		55			(1,316	)

	$	1,132	$	7		$	(2,844	)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2011 and 2010 consist of:

	2011		2010
Deferred tax assets:
Allowance for loan losses	$	4,610	$	4,848
Deferred compensation		440		509
Retirement compensation		1,218		1,141
Stock option compensation		350		815
Post retirement benefits		330		212
Current state franchise taxes		1		-
Non-accrual interest		9		59
Investment securities unrealized losses		-		317
Net operating loss		734		734
Tax credit carryovers		2,751		2,859
Other		311		432

Deferred tax assets		10,754		11,926

Deferred tax liabilities:
Fixed assets depreciation		1,173		1,252
FHLB dividends		260		260
Tax credit – loss on pass-through		313		314
Deferred loan costs		525		476
Investment securities unrealized gains		505		-
Current state franchise benefit		-		9
Other		-		13

Total deferred tax liabilities		2,776		2,324

Net deferred tax assets (see Note 6)	$	7,978	$	9,602

Based upon the level of historical taxable income and projections for future taxable income over the periods during which the deferred tax assets are deductible, management believes it is more-likely-than-not the Company will realize the benefits of these deductible differences.

At December 31, 2011, the Company had approximately $10,300 of state net operating loss carry forwards expiring on various dates ranging from 2028 through 2029 and $2,800 of tax credit carry forwards expiring on various datesranging from 2027 through 2031.

A reconciliation of income taxes computed at the federal statutory rate of 34% and the provision for income taxes is as follows:

	2011			2010			2009

Income tax expense (benefit) at statutory rates	$	1,290		$	908		$	(1,325	)
Reduction for tax exempt interest		(173	)		(290	)		(397	)
State franchise tax, net of federal benefit		213			102			(393	)
Cash surrender value of life insurance		(149	)		(139	)		(143	)
Solar credit amortization		(323	)		(387	)		(465	)
Other		274			(187	)		(121	)

	$	1,132		$	7		$	(2,844	)

Accounting for Uncertainty in Income Taxes

During 2011 the Company recognized an increase for unrecognized tax benefits. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


Balance at January 1, 2011	$	123
Additions for tax positions taken in the current period		-
Reductions for tax positions taken in the current period		-
Additions for tax positions taken in prior years		67
Reductions for tax positions taken in prior years		(15	)
Decreases related to settlements with taxing authorities		(92	)
Decreases as a result of a lapse in statue of limitations		-

Balance at December 31, 2011	$	83

The Company does not anticipate any significant increase or decrease in unrecognized tax benefits during 2012. If recognized, the entire amount of the unrecognized tax benefits would affect the effective tax rate.

The Company classifies interest and penalties as a component of the provision for income taxes. At December 31, 2011, unrecognized interest and penalties were $17. The tax years ended December 31, 2010, 2009, 2008 and 2007 remain subject to examination by the Internal Revenue Service. The tax years ended December 31, 2010, 2009, 2008, 2007 and 2006 remain subject to examination by the California Franchise Tax Board. The deductibility of these tax positions will be determined through examination by the appropriate tax jurisdictions or the expiration of the tax statute of limitations.