Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

Principal Components of Income Tax Expense

Principal components of income tax expense as reflected in the consolidated statements of income are as follows:

	Year Ended December 31,
(Dollars in thousands)	2012			2011			2010
Current taxes	$	8,494		$	7,076		$	5,202
Deferred taxes	(848		)	(1,341		)	(2,253		)
	$	7,646		$	5,735		$	2,949

Reconciliation of Income Tax Computed at Federal Statutory Rates to Effective Income Tax

The income tax provision is less than would be obtained by application of the statutory federal corporate tax rate to pre-tax accounting income as a result of the following items:

	Year Ended December 31,
(Dollars in thousands)	2012			Percent of Pre-tax Income			2011			Percent of Pre-tax Income			2010			Percent of Pre-tax Income
Income tax computed at federal statutory rates	$	8,410			35.0	%	$	6,362			34.0	%	$	3,760			34.0	%
Tax effect of exclusion of interest income on obligations of states and political subdivisions		(1,631	)		(6.8	)		(1,652	)		(8.8	)		(1,516	)		(13.7	)
Reduction of interest expense incurred to carry tax-exempt assets		78			0.3			98			0.5			100			0.9
State income taxes, net of federal tax benefit		1,133			4.7			1,114			6.0			787			7.1
Tax effect of dividends-received deduction on preferred stock		—			—			—			—			(5	)		(0.1	)
Compensation in excess of deductible limits		—			—			41			0.2			—			—
Tax credits		(225	)		(0.9	)		(180	)		(1.0	)		(135	)		(1.2	)
Other		(119	)		(0.5	)		(48	)		(0.3	)		(42	)		(0.3	)
	$	7,646			31.8	%	$	5,735			30.6	%	$	2,949			26.7	%

Deferred Tax Assets and Liabilities

The Corporation's net deferred income taxes totaled $14.9 million and $14.8 million at December 31, 2012 and 2011, respectively. The tax effects of each type of significant item that gave rise to deferred taxes are:

	December 31,
(Dollars in thousands)	2012			2011
Deferred tax asset
Allowance for loan losses and OREO losses	$	15,036		$	14,128
Reserve for indemnification losses	795			647
OREO expenses	226			381
Deferred compensation	2,049			1,916
Other-than-temporary impairment of Fannie Mae and Freddie Mac preferred stock	614			614
Share-based compensation	340			331
Interest on nonaccrual loans	244			119
Cash flow hedges	200			201
Other	1,284			1,240
Deferred tax asset	20,944			19,742
Deferred tax liability
Goodwill and other intangible assets	(2,794		)	(2,509		)
Depreciation	(59		)	(3		)
Net unrealized gain on securities available for sale	(3,205		)	(2,475		)
Deferred tax liability	(6,058		)	(4,987		)
Net deferred tax asset	$	14,886		$	14,755