Accounting For Income Tax and Uncertainties

6 Months Ended

Jun. 30, 2011

Accounting For Income Tax and Uncertainties [Abstract]

ACCOUNTING FOR INCOME TAX AND UNCERTAINTIES

NOTE 8. ACCOUNTING FOR INCOME TAX AND UNCERTAINTIES

The Company’s effective income tax rate was 17.12% for the six months ended June 30, 2011, compared with 33.78% for the six months ended June 30, 2010. The decrease in the effective tax rate was primarily driven by reductions of accrued provision for income tax of approximately $393,000, recognized by our mortgage subsidiary and immaterial true-up adjustments.

The Company’s provision for income taxes includes both federal and state income taxes and reflects the application of federal and state statutory rates to the Company’s income before taxes. The principal difference between statutory tax rates and the Company’s effective tax rate is the benefit derived from investing in tax-exempt securities and preferential state tax treatment for qualified enterprise zone loans.

The Company accounts for income taxes under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using currently enacted tax rates applied to such taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Noncontrolling interests are presented in the income statement such that the consolidated income statement includes income and income tax expense from both the Company and noncontrolling interests. The effective tax rate is calculated by dividing income tax expense by income before tax expense for the consolidated entity.