Audited Financial Statements NOTE 13: INCOME TAXES The Company had net deferred tax assets of $2.4 million and $5.8 million at December 31, 2011 and 2010,  respectively. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2011 and 2010 are presented below: Total income tax expense differs from the amounts computed by applying the statutory federal income tax rate of 34%  to earnings before income taxes. A reconciliation of the differences for the years ended December 31, 2011, 2010, and 2009,  is presented below. As discussed in Footnote 1, income tax expense for the year ended December 31, 2009 included a $281  thousand tax benefit related to the correction of an error in prior periods. The error resulted from the incorrect calculation of tax basis for certain available-for-sale securities, primarily related to periods prior to January 1, 2007. For the years ended December 31, 2011, 2010, and 2009 the components of income tax expense (benefit) from  continuing operations are presented below.  Year ended December 31 (Dollars in thousands) 2011 2010 2009 Current income taxes: Federal $ 72 1,290 1,563 State 353 285 287 Total current income taxes 425 1,575 1,850 Deferred income taxes: Federal (344) (698) (1,930) State (24) (79) (260) Total deferred income taxes (368) (777) (2,190) Total income tax expense (benefit)  $ 57 798 (340) 2011 2010 2009 Percent of Percent of Percent of pre-tax pre-tax pre-tax (Dollars in thousands) Amount earnings Amount earnings Amount earnings Earnings before income taxes $ 5,595 6,144 2,064 Income taxes at statutory rate 1,902 34.0 % 2,089 34.0 % 702 34.0 % Tax-exempt interest (1,028) (18.4) (1,042) (17.0) (939) (45.5) State income taxes, net of  federal tax effect 183 3.3 151 2.5 44 2.1 Low-income housing credit (891) (15.9) (220) (3.6) (228) (11.0) Bank owned life insurance (157) (2.8) (154) (2.5) (144) (7.0) Change in valuation allowance — — — — 505 24.5 Correction of prior period error (281) (13.6) Other 48 0.9 (26) (0.4) 1 — Total income tax expense (benefit) $ 57 1.0 % 798 13.0 % (340) (16.5)% page 65