Note 12 — Income Taxes

The current and deferred amounts of income tax expense for the years ended December 31, 2012, 2011 and 2010, respectively, are as follows:



	2012		2011		2010
	(Dollars in Thousands)
Current:
Federal	$	5,506	$	3,818	$	(27	)
State		259		187		198
Subtotal		5,765		4,005		171
Deferred:
Federal		1,085		2,157		(191	)
State		827		1,249		242
Subtotal		1,912		3,406		51
Income tax expense	$	7,677	$	7,411	$	222

Reconciliation between the amount of reported income tax expense and the amount computed by applying the statutory Federal income tax rate is as follows:



	2012			2011			2010
	(Dollars in Thousands)
Income before income tax expense	$	25,184		$	21,337		$	7,226
Federal statutory rate		35	%		35	%		34	%
Computed "expected" Federal income tax expense		8,814			7,468			2,457
State tax, net of Federal tax benefit		706			933			291
Bank owned life insurance		(356	)		(363	)		(417	)
Tax-exempt interest and dividends		(1,228	)		(595	)		(75	)
Tax on bank owned life insurance policy surrender gain		—			—			539
Reversal of unrealized tax benefit & interest		—			—			(2,551	)
Bargain gain on Saddle River Valley Bank acquisition		(314	)		—			—
Other, net		55			(32	)		(22	)
Income tax	$	7,677		$	7,411		$	222

The tax effects of temporary differences that give rise to significant portions of the deferred tax asset and deferred tax liability at December 31, 2012 and 2011 are presented in the following table:



	2012		2011
	(Dollars in Thousands)
Deferred tax assets:
Impaired assets	$	1,967	$	2,820
Allowance for loan losses		4,040		3,810
Employee benefit plans		64		13
Unrealized losses on securities available-for-sale		—		1,154
Pension actuarial losses		2,473		2,150
Other		454		512
Federal AMT Credits		—		854
NJ NOL		—		373
NJ AMA credits		131		210
Total deferred tax assets	$	9,129	$	11,896
Deferred tax liabilities:
Depreciation	$	294	$	303
Market discount accretion		148		43
Deferred loan costs, net of fees		330		397
Purchase accounting		608		40
Unrealized gains on securities available-for-sale		5,675		—
Total deferred tax liabilities		7,055		783
Net deferred tax asset	$	2,074	$	11,113

Based on the Corporation's historical and current taxable income and the projected future taxable income, management believes it is more likely than not that the Corporation will realize the benefit of the net deductible temporary differences existing at December 31, 2012 and 2011, respectively.

At December 31, 2012, the Corporation has no federal and state income tax loss carry forwards.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, the projected future taxable income, and tax planning strategies in making this assessment. During 2012 and 2011, based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, the Corporation believes the net deferred tax assets are more likely than not to be realized.

The Corporation's federal income tax returns are open and subject to examination from the 2009 tax return year and forward. The Corporation's state income tax returns are generally open from the 2008 and later tax return years based on individual state statutes of limitations.