Income Taxes

12 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

14. Income Taxes

The Corporation and the Bank file a consolidated federal income tax return. The provision for income taxes for the years ended December 31 is comprised of the following:

(Dollar amounts in thousands)	2011		2010
Current	$	838	$	634
Deferred		112		167
	$	950	$	801

A reconciliation between the provision for income taxes and the amount computed by multiplying operating results before income taxes by the statutory federal income tax rate of 34% for the years ended December 31 is as follows:

	2011						2010
(Dollar amounts in thousands)	Amount			% Pre-tax Income			Amount			% Pre-tax Income
Provision at statutory tax rate	$	1,626			34.0	%	$	1,316			34.0	%
Increase (decrease) resulting from:
Tax free interest, net of disallowance		(552	)		(11.5%)			(448	)		(11.6%)
Earnings on BOLI		(72	)		(1.5%)			(71	)		(1.8%)
Other, net		(52	)		(1.1%)			4			0.1	%
Provision	$	950			19.9	%	$	801			20.7	%

The tax effects of temporary differences between the financial reporting basis and income tax basis of assets and liabilities that are included in the net deferred tax asset or liability as of December 31 relate to the following:

(Dollar amounts in thousands)	2011			2010
Deferred tax assets:
Allowance for loan losses	$	1,046		$	1,305
Funded status of pension plan		785			484
Securities impairment		226			226
Stock compensation		132			133
Nonaccrual loan interest income		122			146
Other real estate owned		41			7
Other		32			35
Accrued pension cost		23			6
Gross deferred tax assets		2,407			2,342
Deferred tax liabilities:
Net unrealized gains on securities		1,518			88
Depreciation		618			699
Intangible assets		204			106
Deferred loan fees		79			92
Purchase accounting adjustments		38			50
Prepaid expenses		37			148
Other		3			8
Gross deferred tax liabilities		2,497			1,191
Net deferred tax asset (liability)	$	(90	)	$	1,151

In accordance with relevant accounting guidance, the Corporation determined that it was not required to establish a valuation allowance for deferred tax assets since it is more likely than not that the deferred tax asset will be realized through carry-back to taxable income in prior years, future reversals of existing taxable temporary differences, tax strategies and, to a lesser extent, future taxable income. The Corporation’s net deferred tax asset or liability is recorded in the consolidated financial statements as a component of other assets or other liabilities.

At December 31, 2011 and December 31, 2010, the Corporation had no unrecognized tax benefits recorded. The Corporation does not expect the total amount of unrecognized tax benefits to significantly increase within the next twelve months. The Corporation recognizes interest and penalties on unrecognized tax benefits in income taxes expense in its Consolidated Statements of Income.

The Corporation and the Bank are subject to U.S. federal income tax as well as a capital-based franchise tax in the Commonwealth of Pennsylvania. The Corporation and the Bank are no longer subject to examination by taxing authorities for years before 2008.