16.

Income Taxes

The provision for income taxes consists of the following for the years ended December 31:

(In thousands)	2011			2010
Current Tax expense/(benefit):
Federal	$	233		$	(4,654	)
State		670			(1,524	)
	$	903		$	(6,178	)
Deferred tax (benefit)/expense:
Federal	$	(1,291	)	$	(1,917	)
State		(247	)		78
	$	(1,538	)	$	(1,839	)
Income tax benefit for the year	$	(635	)	$	(8,017	)

The reconciliation between the statutory federal income tax rate and effective income tax rate is as follows:

	2011			2010
Federal statutory rate		35.0	%		(35.0	)%
Tax-exempt income on securities and loans		(30.7	)		(6.6	)
Tax-exempt BOLI income		(12.1	)		(2.0	)
State income tax, net of federal tax benefit		6.3			(5.0	)
Tax credits		(22.5	)		3.68
Other		2.7			.92
		(21.3	)%		(44.0	)%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Corporation's temporary differences as of December 31 are as follows:

(In thousands)	2011			2010
Deferred tax assets:
Allowance for loan losses	$	7,862		$	8,935
Deferred loan fees		134			164
Deferred compensation		624			585
Federal and State Tax loss carry forwards		4,291			4,378
AMT and Other carry forwards		985			0
Unrealized loss on investment securities available-for-sale		8,935			10,002
Pension/SERP		935			0
Other than temporary impairment on investment securities		5,965			5,948
Other real estate owned		1,836			1,149
Other		1,716			1,166
Total deferred tax assets		33,283			32,327
Valuation allowance		(1,364	)		(1,212	)
Total deferred tax assets less valuation allowance		31,919			31,115
Deferred tax liabilities:
Amortization of goodwill and core deposit intangible		(1,507	)		(1,146	)
Pension/SERP		0			(867	)
Depreciation		(1,601	)		(1,926	)
Other		(100	)		(776	)
Total deferred tax liabilities		(3,208	)		(4,715	)
Net deferred tax assets	$	28,711		$	26,400

State income tax expense/(benefit) amounted to $.4 million during 2011 and ($1.4) million during 2010.

The Company has Federal net operating losses ("NOL") of approximately $7.6 million and a West Virginia NOLs of approximately $5.1 million for which deferred tax assets of $2.7 million and $0.2 million, respectively have been recorded at December 31, 2011. The Federal and West Virginia NOLs were created in 2011 and 2010 and therefore will begin expiring in 2030.

The Company has Maryland net operating loss carry-forwards of $25.4 million for the NOL of the Parent Company for which a deferred tax asset of $1.4 million has been recorded at December 31, 2011. There has been and continues to be a full valuation allowance on the Parent Company's NOL based on the fact that the Parent company files a separate tax return and has recurring tax losses and will not generate sufficient taxable income in the future to utilize them before they expire beginning in 2019.