Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

Income Taxes

NOTE 12, Income Taxes

The components of income tax expense for the current and prior year-ends are as follows:

	2012			2011
	(in thousands)
Current tax expense (benefit)	$	1,002		$	(1,031	)
Deferred tax expense (benefit)		(7	)		2,094
Reported tax expense	$	995		$	1,063

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:

	Years Ended December 31,
	2012			2011
	(in thousands)
Expected tax expense (34%)	$	1,762		$	1,480
Interest expense on tax-exempt assets		14			7
Tax credit for investment		(95	)		(82	)
Tax-exempt interest		(272	)		(100	)
Bank-owned life insurance		(455	)		(280	)
Other, net		41			38
Reported tax expense	$	995		$	1,063

The effective tax rates for 2012 and 2011 were 19.2% and 24.4%, respectively.

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

	December 31,
	2012			2011
	(in thousands)
Deferred tax assets:
Allowance for loan losses	$	2,490		$	2,889
Interest on nonaccrual loans		325			101
Foreclosed assets		924			899
Pension - other comprehensive income		1,125			966
Bank owned life insurance benefit		99			91
Charitable contributions carried forward		64			97
Unexercised nonqualified options		36			32
Other		12			0
	$	5,075		$	5,075
Deferred tax liabilities:
Depreciation	$	(763	)	$	(741	)
Accretion of discounts on securities		0			(2	)
Deferred loan fees and costs		(267	)		(291	)
Pension		(753	)		(914	)
Net unrealized gains on securities available-for-sale		(1,026	)		(786	)
Other		0			(1	)
		(2,809	)		(2,735	)
Net deferred tax assets	$	2,266		$	2,340

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 2009.

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