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Federal Income Taxes | 12 Months Ended
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Dec. 31, 2012
Federal Income Taxes [Abstract] |
FEDERAL INCOME TAXES | NOTE 8 – FEDERAL INCOME TAXES The consolidated income tax expense (benefit) is as follows:
|  | 2012 |  |  | 2011 |  |  | 2010 |
Current expense (benefit) |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |
Deferred expense (benefit) |  |  | 5,636,000 |  |  |  | 0 |  |  |  | (47,000 | )
Valuation allowance – change in estimate |  |  | 0 |  |  |  | (27,361,000 | ) |  |  | 0 |
Tax expense (benefit) |  | $ | 5,636,000 |  |  | $ | (27,361,000 | ) |  | $ | (47,000 | )
2011 reflects the reversal of the valuation allowance, which was established in 2009, related to a change in estimate about our ability to realize our net deferred tax assets in future years based on a change in circumstances. A reconciliation of the differences between the federal income tax expense (benefit) recorded and the amount computed by applying the federal statutory rate to income before income taxes is as follows:
|  | 2012 |  |  | 2011 |  |  | 2010 |
Tax at statutory rate (35%) |  | $ | 6,360,000 |  |  | $ | 3,543,000 |  |  | $ | (4,677,000 | )
Increase (decrease) from |  |  |  |  |  |  |  |  |  |  |  |
Tax-exempt interest |  |  | (486,000 | ) |  |  | (595,000 | ) |  |  | (706,000 | )
Bank owned life insurance |  |  | (535,000 | ) |  |  | (622,000 | ) |  |  | (601,000 | )
Change in valuation allowance |  |  | 0 |  |  |  | (29,640,000 | ) |  |  | 5,896,000 |
Other |  |  | 297,000 |  |  |  | (47,000 | ) |  |  | 41,000 |
Tax expense (benefit) |  | $ | 5,636,000 |  |  | $ | (27,361,000 | ) |  | $ | (47,000 | )
Significant components of deferred tax assets and liabilities as of December 31, 2012 and 2011 are as follows:
|  | 2012 |  |  | 2011 |
Deferred income tax assets |  |  |  |  |  |  |  |
Allowance for loan losses |  | $ | 10,037,000 |  |  | $ | 12,786,000 |
Deferred loan fees |  |  | 229,000 |  |  |  | 145,000 |
Deferred compensation |  |  | 506,000 |  |  |  | 502,000 |
Nonaccrual loan interest income |  |  | 892,000 |  |  |  | 635,000 |
Fair value write-downs on foreclosed properties |  |  | 2,124,000 |  |  |  | 2,136,000 |
Net operating loss carryforward |  |  | 8,236,000 |  |  |  | 11,201,000 |
Tax credit carryforwards |  |  | 1,198,000 |  |  |  | 977,000 |
Fair value of interest rate swap |  |  | 390,000 |  |  |  | 0 |
Contributions carryforwards |  |  | 256,000 |  |  |  | 400,000 |
Other |  |  | 369,000 |  |  |  | 318,000 |
|  |  | 24,237,000 |  |  |  | 29,100,000 |
Deferred income tax liabilities |  |  |  |  |  |  |  |
Depreciation |  |  | 491,000 |  |  |  | 549,000 |
Unrealized gain on securities |  |  | 1,278,000 |  |  |  | 2,042,000 |
Prepaid expenses |  |  | 339,000 |  |  |  | 383,000 |
Other |  |  | 113,000 |  |  |  | 113,000 |
|  |  | 2,221,000 |  |  |  | 3,087,000 |
Total net deferred tax asset |  | $ | 22,016,000 |  |  | $ | 26,013,000 |
At December 31, 2012, we had carryforwards of the following tax attributes: gross federal net operating loss of $23.9 million that expires in years 2029 through 2031; general business tax credits of $0.6 million that expire in the years 2028 through 2032; and $0.6 million of federal alternative minimum tax credits with an indefinite life. $0.3 million of the gross federal net operating loss relates to unrealized excess benefits on stock-based compensation for which a tax benefit will be recorded to shareholders’ equity when utilized. Accounting guidance requires us to assess whether a valuation allowance should be carried against our deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. In making such judgments, we consider both positive and negative evidence and analyze changes in near-term market conditions as well as other factors which may impact future operating results. Significant weight is given to evidence that can be objectively verified. During 2011, we returned to pre-tax profitability for four consecutive quarters. Additionally, we experienced lower provision expense, continued declines in nonperforming assets and problem asset administration costs, a higher net interest margin, further strengthening of our regulatory capital ratios, and additional reductions in wholesale funding. Our analysis of the positive and negative evidence led us to conclude that, as of December 31, 2011, it was more likely than not that we had returned to sustainable profitability in amounts sufficient to allow for realization of our deferred tax assets in future years. Consequently, in 2011 we reversed the valuation allowance that we had previously determined necessary to carry against our entire net deferred tax asset as of December 31, 2010 and 2009. $27.4 million of our December 31, 2010 valuation allowance was reversed due to this change in judgment and the remaining $2.2 million was reduced due to the tax effects of our 2011 pre-tax income. At December 31, 2012, the positive evidence, including that cited above, continues to outweigh any negative evidence and, therefore, we continue to believe it is more likely than not that we will be able to realize all of our deferred tax assets in future years. We had no unrecognized tax benefits at any time during 2012 or 2011 and do not anticipate any significant increase in unrecognized tax benefits during 2013. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is our policy to record such accruals in our income tax accounts; no such accruals existed at any time during 2012 or 2011. Our U.S. federal income tax returns are no longer subject to examination for all years before 2010.

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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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