Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

NOTE 12, Income Taxes

The components of income tax expense for the current year-end and the preceding two are as follows:

	2011			2010			2009
	(in thousands)
Current tax expense (benefit)	$	(1,031	)	$	2,577		$	664
Deferred tax expense (benefit)		2,094			(2,428	)		(453	)
Reported tax expense	$	1,063		$	149		$	211

A reconciliation of the "expected" Federal income tax expense on income before income taxes with the reported income tax expense for the same periods follows:

	2011			2010			2009
	(in thousands)
Expected tax expense (34%)	$	1,480		$	577		$	644
Interest expense on tax-exempt assets		7			10			23
Tax credit for investment		(82	)		(27	)		0
Tax-exempt interest		(100	)		(131	)		(226	)
Bank-owned life insurance		(280	)		(331	)		(325	)
Other, net		38			51			95
Reported tax expense	$	1,063		$	149		$	211

The effective tax rates for 2011, 2010 and 2009 were 24.4%, 8.8% and 11.1%, respectively.

The components of the net deferred tax asset, included in other assets, are as follows:

	December 31,
	2011			2010
	(in thousands)
Deferred tax assets:
Allowance for loan losses	$	2,889		$	4,497
Interest on nonaccrual loans		101			311
Foreclosed assets		899			968
Pension - other comprehensive income		966			846
Bank owned life insurance benefit		91			78
Contribution carried forward		97			0
Net unrealized loss on securities available-for sale		0			477
Unexercised nonqualified options		32			24
	$	5,075		$	7,201
Deferred tax liabilities:
Depreciation	$	(741	)	$	(367	)
Accretion of discounts on securities		(2	)		(3	)
Deferred loan fees and costs		(291	)		(317	)
Pension		(914	)		(935	)
Net unrealized gains on securities available-for-sale		(786	)		0
Other		(1	)		(3	)
		(2,735	)		(1,625	)
Net deferred tax assets	$	2,340		$	5,576

The Company files income tax returns in the U.S. federal jurisdiction and the Commonwealth of 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.

The last Internal Revenue Service (IRS) examination was conducted in 2009 on the Company's U.S. income tax return for 2008.