9. INCOME TAXES

A summary of income tax provision (benefit) follows for the years ended December 31:


	Current			Deferred			Total
	(In thousands)
2011
Federal	$	4,154		$	7,614		$	11,768
State		2,810			1,082			3,892

	$	6,964		$	8,696		$	15,660

2010
Federal	$	(463	)	$	(4,906	)	$	(5,369	)
State		473			(3,004	)		(2,531	)

	$	10		$	(7,910	)	$	(7,900	)

2009
Federal	$	469		$	(4,497	)	$	(4,028	)
State		(296	)		(1,875	)		(2,171	)

	$	173		$	(6,372	)	$	(6,199	)

A reconciliation of the difference between the federal statutory income tax rate and the effective tax rate is shown in the following table for the years ended December 31:


	2011			2010			2009
Statutory tax rate (benefit)		35	%		(35	)%		(35	)%
State taxes (benefit)-net of federal tax effect		6			(11	)		(12	)
CRA investment tax credit		(3	)		(4	)		(4	)
Other		(1	)		(2	)		(1	)

		37	%		(52	)%		(52	)%

Deferred tax assets and liabilities at December 31, 2011 and 2010 are comprised of the following:


	2011			2010
	(In thousands)
Deferred tax assets:
Purchase accounting fair value adjustment	$	46,957		$	0
Statutory bad debt deduction less than financial statement provision		28,881			29,160
Net operating loss carryforward		6,901			6,600
Capital loss carryforward		53			0
Investment security provision		1,657			802
Lease expense		1,653			1,510
State tax deductions		799			1
Accrued compensation		106			469
Deferred compensation		625			452
Mark to market on loans held for sale		2,158			801
Depreciation		1,180			540
Nonaccrual loan interest		53			645
Other real estate owned		475			205
Tax credits		0			1,191
Other		2,072			733
Non-qualified stock option and restricted unit expense		1,486			1,549
Goodwill		1,126			0
Amortization of intangibles		0			324

	$	96,182		$	44,982

Deferred tax liabilities:
FHLB stock dividends	$	(1,428	)	$	(490	)
Deferred loan costs		(1,439	)		(1,018	)
State taxes deferred and other		(8,409	)		(3,692	)
Prepaid expenses		(955	)		(1,013	)
FDIC loss share receivable		(3,081	)		0
Amortization of intangibles		(953	)		0
Unrealized gain on securities available for sale		(7,210	)		(1,628	)
Unrealized gain on interest rate swaps		(17	)		(35	)
Unrealized gain on interest only strips		(33	)		(34	)

		(23,525	)		(7,910	)

Valuation allowance on capital loss carryforward		(53	)		0

Net deferred tax assets:	$	72,604		$	37,072

At December 31, 2011, the Company had capital loss carryforwards of approximately $53 thousand. The Company has evaluated the available evidence supporting the realization of its deferred tax assets and determined that it is not more likely than not that the Company would generate future capital gains to offset the capital loss carryforwards, and accordingly, the Company has recorded a valuation allowance against the capital loss carryforwards of $53 thousand. Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management evaluates both positive and negative evidence, including the existence of any cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry-back years, the forecasts of future income, applicable tax planning strategies, and assessments of current and future economic and business conditions. This analysis is updated quarterly and adjusted as necessary. Based on the analysis, the Company has determined that except for the valuation allowance against the capital loss carryforwards of $53 thousand, a valuation allowance for deferred tax assets was not required as of December 31, 2011.

A summary of the Company's net operating loss carry-forwards is as follows:


	FEDERAL						STATE
	Remaining Amount		Expires		Annual Limitation		Remaining Amount		Expires		Annual Limitation
	(In thousands)
2011
Nara Ownership Change	$	0		N/A	$	0	$	124		2016	$	83
Korea First Bank of New York		3,973		2019		497		0		N/A		0
Asiana		1,146		2015		348		723		2014		348
Nara Bank Net Operating Loss		0		N/A		N/A		12,539		2031		12,539
Center Bank Net Operating Loss		0		N/A		N/A		37,394		2031		13,356

Total	$	5,119			$	845	$	50,780			$	26,326

2010
Nara Ownership Change	$	0		N/A	$	0	$	124		2015	$	83
Korea First Bank of New York		4,967		2019		497		0		N/A		0
Asiana		1,841		2015		348		723		2013		348
Nara Bank Net Operating Loss		8,323		2025		N/A		11,735		2030		N/A

Total	$	15,131			$	845	$	12,582			$	431

For the 2010 and 2011 tax years, the state of California suspended the utilization of Net Operating Losses ("NOLs"). Suspended NOLs for 2010 and 2011 will be allowed additional carryover periods of two years and one year, respectively.

The Company and our subsidiaries are subject to U.S. federal income tax as well as income tax of the state of California and various other state income taxes. The statute of limitations related to the consolidated Federal income tax return is closed for all tax years up to and including 2007. The expiration of the statute of limitations related to the various state income tax returns that the Company and subsidiaries file, varies by state. The Company is currently under examination by New York City for the 2007, 2008, and 2009 tax years. While the outcome of the examination is unknown, the Company expects no material adjustments.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2011 and 2010 is as follows:


	2011		2010
	(In thousands)
Balance at January 1,	$	276	$	215
Additions based on tax positions related to the current year		101		52
Additions based on tax positions related to the prior year		192		9

Balance at December 31,	$	569	$	276

The total amount of unrecognized tax benefits was $569 thousand at December 31, 2011 and $276 thousand at December 31, 2010 and is primarily for uncertainties related to California enterprise zone loan interest deductions taken in prior years. The total amount of tax benefits that, if recognized, would favorably impact the effective tax rate was $420 thousand and $202 thousand at December 31, 2011 and 2010, respectively. The amount of unrecognized tax benefits increased due to the current year accrual of $101 thousand and additional accrual of $192 thousand for prior years. The Company does not expect the total amount of unrecognized tax benefits to significantly change in the next twelve months.

The Company recognizes interest and penalties related to income tax matters in income tax expense. The Company had approximately $77 thousand and $35 thousand for interest and penalties accrued at December 31, 2011 and 2010, respectively.