NOTES TO FINANCIAL STATEMENTS (continued) Note 1 - Summary of Significant Accounting Policies (Continued)  Income Taxes (Continued) Deferred income tax expense or benefit results from changes in deferred tax assets and liabilities between periods. Deferred  tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some  portion or all of a deferred tax asset will not be realized. The Bank accounts for uncertain tax positions if it is more likely than not, based on the technical merits, that the tax position will  be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms  examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that  meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit  that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all  relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold  considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment.  The Bank recognizes interest and penalties on income taxes, if any, as a component of the provision for income taxes. There were  no interest and penalties recognized in 2011 or 2010. Off-Balance Sheet Financial Instruments Stock-Based Compensation Earnings Per Share Comprehensive Income (Loss) In the ordinary course of business, the Bank enters into off-balance sheet financial instruments consisting of commitments to  extend credit. Such financial instruments are recorded in the statements of condition when they are funded.  The Bank applies FASB ASC Topic 718 Stock-Based Compensation, which contains a fair value-based method for valuing stock-  based compensation, and measures compensation cost at the grant date based on the fair value of the award. Compensation is  recognized over the service period, which is usually the vesting period.  Basic earnings per share represents the effect of earnings upon the weighted average number of shares outstanding for the period.  Diluted earnings per share reflects the effect of earnings upon weighted average shares including the potential dilution that could  occur if securities or contracts to issue common stock were converted or exercised, utilizing the treasury stock method.  Accounting principles generally accepted in the United States of America require that recognized revenue, expenses, and gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the stockholders’ equity section of the statements of condition, such items, along with net income (loss), are components of comprehensive income (loss). The components of other comprehensive income (loss) and related tax effects for the years ended December 31 are as follows: Certain reclassifications have been made to 2010 information to conform to the 2011 presentation. The reclassifications had no  effect on the results of operations. Reclassifications 2011 2010 Unrealized holding gains on available for sale securities arising during the year $ 107 $ 15 Reclassification adjustment for gains realized in net income Other comprehensive income (loss), net $ 66 (41) (In thousands) ........................................... ......................................................................... .................................. $ (625) (640) 18