11. Income Taxes

Income taxes for the years ended December 31 consisted of the following:

	2012		2011		2010
	(in thousands)
Current income tax provision:
Federal	$	6,403	$	3,781	$	1,697
State	2,026		1,386		602
Total current income tax provision	8,429		5,167		2,299

Deferred income tax provision (benefit):
Federal	1,262		899		(121		)
State	298		345		(95		)
Total deferred income tax provision (benefit)	1,560		1,244		(216		)

Total income tax provision	$	9,989	$	6,411	$	2,083

A reconciliation from statutory federal income taxes to the Company’s effective income taxes for the years ended December 31 are as follows:

	2012			2011			2010
	(in thousands)
Statutory federal income tax provision	$	8,760		$	5,774		$	2,149
California franchise tax, net of federal income tax effect	1,842			1,214			335
Other, including tax exempt income	(613		)	(577		)	(401		)
Total income tax provision	$	9,989		$	6,411		$	2,083

Deferred tax assets (liabilities) were comprised of the following temporary differences between the financial statement carrying amounts and the tax basis of assets at December 31:

	2012			2011
	(in thousands)
Deferred tax assets:
Accrued expenses	$	442		$	652
Depreciation on premises and equipment	—			98
Net operating loss	3,673			4,283
Allowance for loan losses, net of bad debt charge-offs	3,390			3,507
State taxes	765			471
Capital loss on mutual funds	281			814
Other-than-temporary impairment	2,180			2,068
Restricted stock and options expense	6			6
Other	147			73
Total deferred tax assets	10,884			11,972

Deferred tax liabilities:
Federal Home Loan Bank stock dividends	(560		)	(758		)
Deferred FDIC gain	(2,367		)	(1,641		)
Depreciation	(111		)	—
Unrealized gain on available for sale securities	(772		)	(221		)
Other	(187		)	(354		)
Total deferred tax liabilities	(3,997		)	(2,974		)
Net deferred tax asset	$	6,887		$	8,998

At December 31, 2012, there was no valuation allowance against the Company’s deferred tax asset. The Company has a net operating loss carryforward of approximately $9.6 million for federal income tax purposes which expires in 2023. In addition, the Company has a net operating loss carryforward of approximately $4.7 million for California franchise tax purposes. However, the state of California has suspended the net operating loss deduction utilization for the tax years 2008, 2009, 2010, and 2011. The net operating loss deduction for the state is now scheduled to expire in 2017. With the completion of the secondary offering in October 2003, the Company had an “ownership change” as defined under Internal Revenue Code Section 382. Under Section 382, which has also been adopted under California law, if during any three-year period there is more than a 50 percentage point change in the ownership of the Company, then the future use of any pre-change net operating losses or built-in losses of the Company are subject to an annual percentage limitation based on the value of the company at the ownership change date. The ownership change reduced the net operating loss carryforward for federal and state tax purposes. The annual usable net operating loss carryforward going forward is approximately $932,000 per year.

As of December 31, 2012, tax years for 2009 through 2011 remain open to audit by the Internal Revenue Service and 2008 through 2011 by the California state tax authority. Currently, the Bank is undergoing an examination of its 2007, 2008, and 2009 income tax returns by the California Franchise Tax Board. In connection with the California Franchise Tax Board exam, the state disallowed our enterprise zone net interest deductions of $141,000 for the year ended December 31, 2005 and $121,000 for the year ended December 31, 2006, tax years 2005 and 2006. As part of the settlement with the FTB audit, the Bank settled for $198,528 related to the of tax years 2005 and 2006. During 2012, The Bank underwent an examination of its 2007, 2008, and 2009 income tax returns by the California Franchise Tax Board. After the examination, the State disallowed $96,117 for the year ended December 31, 2007and $117,141 for December 31, 2008 and $15,001 for December 31, 2009, tax years 2007, 2008 and 2009, which was accrued for at December 31, 2012.