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Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2011
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES The provision for (benefit from) income taxes for the years ended December 31, 2011, 2010, and 2009 consisted of the following:
| Federal |  | State |  | Total
| (In thousands)
2011 |  |  |  |  |
Current | $ | 686 |  |  | $ | (95 | ) |  | $ | 591 |
Deferred | 893 |  |  | 377 |  |  | 1,270 |
Provision for income taxes | $ | 1,579 |  |  | $ | 282 |  |  | $ | 1,861 |
2010 |  |  |  |  |
Current | $ | 1,472 |  |  | $ | 496 |  |  | $ | 1,968 |
Deferred | (1,677 | ) |  | (660 | ) |  | (2,337 | )
Benefit from income taxes | $ | (205 | ) |  | $ | (164 | ) |  | $ | (369 | )
2009 |  |  |  |  |
Current | $ | (1,374 | ) |  | $ | (90 | ) |  | $ | (1,464 | )
Deferred | 804 |  |  | (16 | ) |  | 788 |
Benefit from income taxes | $ | (570 | ) |  | $ | (106 | ) |  | $ | (676 | )
The determination of the amount of deferred income tax assets which are more likely than not to be realized is primarily dependent on projections of future earnings, which are subject to uncertainty and estimates that may change given economic conditions and other factors. The realization of deferred income tax assets is assessed and a valuation allowance is recorded if it is more likely than not that all or a portion of the deferred tax asset will not be realized. More likely than not is defined as greater than a 50% chance. All available evidence, both positive and negative is considered to determine whether, based on the weight of the evidence, a valuation allowance is needed. Based on management's analysis as of December 31, 2011, the Company established a deferred tax valuation allowance in the amount of $114,000 for California capital loss carryforwards. Deferred tax assets (liabilities) consisted of the following:
| December 31,
| 2011 |  | 2010
| (In thousands)
Deferred tax assets: |  |  |  |  |
Allowance for credit losses | $ | 4,690 |  |  | $ | 4,370 |
Deferred compensation | 3,660 |  |  | 3,445 |
Net operating loss carryover from acquisition | 1,188 |  |  | 1,959 |
Bank premises and equipment | 909 |  |  | 907 |
Mark to market adjustment | 416 |  |  | 551 |
Other deferred taxes | 231 |  |  | 682 |
Other then temporary impairment | 282 |  |  | 653 |
Other real estate | — |  |  | 566 |
Loan and investment impairment | 352 |  |  | 383 |
State Enterprise Zone credit carry-forward | 522 |  |  | 343 |
State capital loss carry-forward | 114 |  |  | 120 |
Alternative minimum tax credit | 530 |  |  | 138 |
State taxes | 58 |  |  | 144 |
Other reserves | — |  |  | 10 |
Partnership income | 74 |  |  | 39 |
Total deferred tax assets | 13,026 |  |  | 14,310 |
Valuation allowance | (114 | ) |  | — |
Net deferred tax asset after valuation allowance | 12,912 |  |  | 14,310 |
Deferred tax liabilities: |  |  |  |  |
Finance leases | (2,650 | ) |  | (2,581 | )
Unrealized gain on available-for-sale investment securities | (2,884 | ) |  | (676 | )
Core deposit intangible | (322 | ) |  | (493 | )
FHLB stock | (241 | ) |  | (254 | )
Loan origination costs | (176 | ) |  | (189 | )
Total deferred tax liabilities | (6,273 | ) |  | (4,193 | )
Net deferred tax assets | $ | 6,639 |  |  | $ | 10,117 |
The provision for income taxes differs from amounts computed by applying the statutory Federal income tax rates to operating income before income taxes. The significant items comprising these differences for the years ended December 31, 2011, 2010, and 2009 consisted of the following:
| 2011 |  | 2010 |  | 2009
Federal income tax, at statutory rate | 34.0 | % |  | 34.0 | % |  | 34.0 | %
State taxes, net of Federal tax benefit | 3.6 | % |  | (3.7 | )% |  | (3.7 | )%
Tax exempt investment security income, net | (14.0 | )% |  | (34.7 | )% |  | (52.4 | )%
Bank owned life insurance, net | (1.6 | )% |  | (4.6 | )% |  | (6.9 | )%
Solar credits | (1.6 | )% |  | (5.4 | )% |  | (15.7 | )%
Change in uncertain tax positions | 0.5 | % |  | (1.3 | )% |  | 7.7 | %
Other | 1.4 | % |  | 3.0 | % |  | 1.7 | %
Effective tax rate | 22.3 | % |  | (12.7 | )% |  | (35.3 | )%
At December 31, 2011, the Company had Federal and California net operating loss (“NOL”) carry-forwards of approximately $5,794,000 and $5,949,000, respectively from the Service 1 st acquisition, subject to an Internal Revenue Code (IRC) Sec. 382 annual limitation of $1,133,000. Management expects to fully utilize the Service 1 st Federal and California NOL carry-forward. The Federal NOL will begin to expire in 2028. California suspended utilization of NOLs for 2009, 2010 and 2011 tax years for taxpayers with business income in excess of $500,000. The California NOL will begin to expire in 2019. The Company and its Subsidiary file income tax returns in the U.S. federal and California jurisdictions. The Company conducts all of its business activities in the State of California. As of December 31, 2011, the Company had one state income tax examination in process. The outcome of the examination is not settled. There are currently no pending U.S. federal or local income tax examinations by those taxing authorities. The Company is no longer subject to the examination by U.S. federal taxing authorities for the years ended before December 31, 2008 and by the state and local taxing authorities for the years ended before December 31, 2007. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Balance at January 1, 2011 | $ | 211 |
Additions based on tax positions related to the current year | 57 |
Reductions for tax positions of prior years | (13 | )
Balance at December 31, 2011 | $ | 255 |
Of this total, $255,000 represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months. During the years ended December 31, 2011 and 2010, the Company did not recognize any interest and penalties related to uncertain tax positions. In 2009, the Company recognized $32,000 of interest related to the pending state tax examination and no penalties related to uncertain tax positions.

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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 Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: 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 3: 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 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: 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 Reference 6: 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 7: 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 8: 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 + Details
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