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INCOME AND FRANCHISE TAXES | 12 Months Ended
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Dec. 31, 2012
INCOME AND FRANCHISE TAXES |
INCOME AND FRANCHISE TAXES | 20. INCOME AND FRANCHISE TAXES Components of income tax benefit for the years ended December 31, 2012, 2011 and 2010 were as follows:
|  | Current |  | Deferred |  | Total |
|  | (Dollars in thousands) |
Year ended December 31, 2012 |  |  |  |  |  |  |
Federal |  | $ | — |  | $ | — |  | $ | — |
State |  | — |  | — |  | — |
Total |  | $ | — |  | $ | — |  | $ | — |
Year ended December 31, 2011 |  |  |  |  |  |  |
Federal |  | $ | — |  | $ | — |  | $ | — |
State |  | — |  | — |  | — |
Total |  | $ | — |  | $ | — |  | $ | — |
Year ended December 31, 2010 |  |  |  |  |  |  |
Federal |  | $ | — |  | $ | — |  | $ | — |
State |  | — |  | — |  | — |
Total |  | $ | — |  | $ | — |  | $ | — |
Income tax expense for the periods presented differed from the “expected” tax expense (computed by applying the U.S. Federal corporate tax rate of 35% to income (loss) before income taxes) for the following reasons:
|  | Year Ended December 31, |
|  | 2012 |  | 2011 |  | 2010 |
|  | (Dollars in thousands) |
Computed “expected” tax expense (benefit) |  | $ | 16,598 |  | $ | 12,802 |  | $ | (87,834 | )
Increase (decrease) in taxes resulting from: |  |  |  |  |  |  |
Goodwill impairment (not deductible for tax purposes) |  | — |  | — |  | 35,941 |
Tax-exempt interest |  | (820 | ) | (273 | ) | (420 | )
Other tax-exempt income |  | (976 | ) | (1,441 | ) | (1,669 | )
Low-income housing and energy tax credits |  | (1,607 | ) | (1,678 | ) | (8,023 | )
State income taxes, net of Federal income tax effect, excluding impact of deferred tax valuation allowance |  | 2,540 |  | 546 |  | (8,724 | )
Change in the beginning-of-the-year balance of the valuation allowance for deferred tax assets allocated to income tax expense |  | (15,862 | ) | (9,870 | ) | 70,506 |
Other |  | 127 |  | (86 | ) | 223 |
Total |  | $ | — |  | $ | — |  | $ | — |
At December 31, 2012, current Federal income taxes payable was $9 thousand. At December 31, 2011, current Federal income taxes receivable was $46 thousand. Current state income taxes receivable was $1.8 million and $2.3 million at December 31, 2012 and 2011, respectively. The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:
|  | December 31, |
|  | 2012 |  | 2011 |
|  | (Dollars in thousands) |
Deferred tax assets |  |  |  |  |
Allowance for loan and lease losses |  | $ | 33,418 |  | $ | 42,589 |
Accrued expenses |  | 6,727 |  | 5,417 |
Employee retirement benefits |  | 8,952 |  | 8,439 |
Federal and state tax credit carryforwards |  | 35,305 |  | 34,616 |
Investment write-downs and write-offs |  | 3,051 |  | 3,021 |
Interest on nonaccrual loans |  | 4,047 |  | 5,703 |
Federal and state net operating loss carryforwards |  | 86,339 |  | 98,409 |
Other |  | 26,289 |  | 25,213 |
Total deferred tax assets |  | $ | 204,128 |  | $ | 223,407 |
Deferred tax liabilities |  |  |  |  |
Intangible assets |  | $ | 14,962 |  | $ | 16,308 |
FHLB stock dividends received |  | 12,345 |  | 12,345 |
Net unrealized gain on derivatives recognized through AOCI |  | 1,786 |  | 1,959 |
Leases |  | 3,599 |  | 4,494 |
Deferred gain on curtailed retirement plan |  | 3,339 |  | 3,339 |
Liability on utilization of state tax credits |  | 7,475 |  | 7,851 |
Other |  | 13,123 |  | 14,851 |
Total deferred tax liabilities |  | $ | 56,629 |  | $ | 61,147 |
Deferred tax valuation allowance |  | $ | 147,499 |  | $ | 162,260 |
Net deferred tax assets |  | $ | — |  | $ | — |
The valuation allowance for deferred tax assets as of December 31, 2012 and 2011 was $147.5 million and $162.3 million, respectively. The net change in the total valuation allowance was a decrease of $14.8 million and $16.6 million in 2012 and 2011, respectively. Of the total decrease in the valuation allowance in 2012, $15.9 million was recognized as income tax benefit and $1.1 million was charged against AOCI, compared to $9.9 million recognized as income tax benefit and a $6.7 million benefit for AOCI in 2011. In assessing the realizability 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 the periods in which those temporary differences become deductible. Management considers the reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income and tax-planning strategies in making this assessment. Based upon the Company’s cumulative three year loss position and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will be unable to realize the benefits of these deductible differences. The amount of the deferred tax asset considered realizable, however, could change in the near term if estimates of future taxable income during the carryforward period change. At December 31, 2012, the Company had net operating loss carryforwards for Federal income tax purposes of $197.1 million, which are available to offset future Federal taxable income, if any, through 2030. At December 31, 2012, the Company had net operating loss carryforwards for Hawaii and California state income tax purposes of $193.5 million and $40.4 million, respectively, which are available to offset future state taxable income through 2030 for Hawaii and 2031 for California. In addition, we have state tax credit carryforwards of $22.9 million that do not expire, and federal tax credit carryforwards of $12.4 million, of which $10.4 million expire in 20 years, and $2.0 million do not expire. As further described in Note 15, to help protect the Company’s tax benefits, the Company implemented the Tax Benefits Preservation Plan on November 23, 2011 and the Protective Charter Amendment on January 26, 2011. At December 31, 2012, we have no unrecognized tax benefits that, if recognized would favorably affect the effective income tax rate in future periods. We do not expect our unrecognized tax benefits to change significantly over the next 12 months. We are subject to U.S. Federal income tax as well as income tax of multiple state jurisdictions. Taxable years through 2008 are closed.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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