INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2012

The components of the provision (benefit) for income taxes are as follows:

	2012		2011			2010
Current	$	5,105	$	376		$	2,031
Deferred		568		4,099			2,041
Change in valuation allowance		-		(675	)		(255	)
Provision for income taxes	$	5,673	$	3,800		$	3,817

The Company's deferred tax assets and liabilities at December 31 are shown below.

	2012			2011
Deferred tax assets
Allowance for loan losses	$	4,181		$	3,497
Purchase accounting adjustments		3,745			5,470
Net operating loss carryforward		1,409			2,076
Write-downs of other real estate owned		748			424
Taxable income on non-accrual loans		1,955			841
Security writedown		250			253
Accrued expenses		131			157
Other		11			22
Total deferred tax assets		12,430			12,740

Deferred tax liabilities
Amortization of intangibles	$	(4,405	)	$	(4,052	)
Depreciation		(1,027	)		(1,009	)
Federal Home Loan Bank dividends		(377	)		(382	)
Deferred loan fees		(548	)		(450	)
Unrealized gain on investment securities		(3,388	)		(2,583	)
Other		(61	)		(267	)
Total deferred tax liabilities		(9,806	)		(8,743	)

Net deferred taxes	$	2,624		$	3,997

An analysis of the differences between the effective tax rates and the statutory U.S. federal income tax rate is as follows:

	2012					2011					2010
U.S. federal income tax rate	$	5,439		34.0	%	$	3,729		34.0	%	$	4,416		34.0	%
Changes from the statutory rate
State income taxes, net		266		1.7			208		1.9			239		1.9
Tax-exempt interest income		(173	)	(1.1	)		(194	)	(1.8	)		(209	)	(1.6	)
Non-deductible interest expense related to carrying tax-exempt interest earning assets		12		0.1			8		0.1			11		0.1
Non-deductible stock compensation expense		62		0.4			36		0.3			18		0.1
State deferred rate change, net		110		0.7			1,012		9.2			(377	)	(2.9	)
Tax credits, net		(49	)	(0.3	)		(49	)	(0.4	)		(49	)	(0.4	)
Change in valuation allowance, net		-		-			(675	)	(6.1	)		(255	)	(2.0	)
Other		6		0.0			(275	)	(2.5	)		23		0.2
	$	5,673		35.5	%	$	3,800		34.7	%	$	3,817		29.4	%