Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

INCOME TAXES

NOTE 11 – INCOME TAXES

The components of deferred taxes were as follows:

	2011			2010
Deferred tax assets:
Bad debts	$	915		$	719
Deferred compensation		348			308
Deferred loan fees		165			195
FHLMC preferred stock impairment loss		151			151
Nonaccrual loan interest income		112			43
Stock-based compensation		43			26
Real estate owned write-down		38			26
Deferred income		33			37
Accrued bonus		23			14
Charitable contribution carryforward		—			21
AMT credit carryforward		—			17
Other		3			—
Total	$	1,831		$	1,557
Deferred tax liabilities:
Unrealized security gains, net	$	1,876		$	991
Depreciation		911			524
Federal Home Loan Bank stock dividends		542			542
Purchase accounting adjustments		66			105
Mortgage servicing rights		26			33
Prepaid expenses		9			24
Partnership income		3			3
Securities accretion		—			27
Total		3,433			2,249
Net deferred tax liability	$	(1,602	)	$	(692	)

Federal income tax laws provided that the 2002 acquired entity could claim additional bad debt deductions through 1987, totaling $1.9 million. Accounting standards do not require a deferred tax liability to be recorded on this amount, which liability otherwise would total $646 at December 31, 2011. If the Bank were liquidated or otherwise ceases to be a bank or if tax laws were to change, this amount would be expensed.

The components of income tax expense are as follows:

	2011		2010			2009
Current	$	419	$	(24	)	$	780
Deferred		25		95			(382	)
	$	444	$	71		$	398

The following is a reconciliation of income tax at the federal statutory rate to the effective rate of tax on the financial statements:

	2011						2010						2009
	Rate			Amount			Rate			Amount			Rate			Amount
Tax at federal statutory rate		34	%	$	1,039			34	%	$	475			34	%	$	682
Tax-exempt income		(17	)		(513	)		(29	)		(399	)		(13	)		(270	)
Other		(2	)		(82	)		—			(5	)		(1	)		(14	)
Income tax expense		15	%	$	444			5	%	$	71			20	%	$	398

As of December 31, 2011 and December 31, 2010, the Corporation had no unrecognized tax benefits or accrued interest and penalties recorded. The Corporation does not expect the amount of unrecognized tax benefits to significantly increase within the next twelve months. The Corporation records interest and penalties as a component of income tax expense.

The Corporation and its subsidiaries are subject to U.S. federal income tax as well as income tax in the state of Ohio for National Bancshares. The Bank is subject to tax in Ohio based upon its net worth. The Corporation is no longer subject to examination by state taxing authorities for years prior to 2008.