INCOME TAXES

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 15. INCOME TAXES

The following table provides information on components of income tax expense for each of the three years ended December 31.

(Dollars in thousands)	2012			2011			2010
Current tax (benefit) expense:
Federal	$	(3,977	)	$	656		$	1,940
State		(823	)		236			473
		(4,800	)		892			2,413
Deferred income tax benefit:
Federal		(1,140	)		(1,233	)		(2,350	)
State		(625	)		(317	)		(555	)
		(1,765	)		(1,550	)		(2,905	)
Total income tax benefit	$	(6,565	)	$	(658	)	$	(492	)

The following table provides a reconciliation of tax computed at the statutory federal tax rate of 34.0% to the actual tax expense for each of the three years ended December 31.

(Dollars in thousands)	2012			2011			2010
Tax at federal statutory rate		34.0	%		34.0	%		34.0	%
Tax effect of:
Tax-exempt income		0.6			8.8			7.6
Non-deductible goodwill impairment charges		-			(6.0	)		(24.3	)
Other non-deductible expenses		(0.2	)		(2.1	)		(1.3	)
State income taxes, net of federal benefit		5.9			3.6			2.4
Other		0.2			4.0			4.4
Actual income tax expense rate		40.5	%		42.3	%		22.8	%

The following table provides information on significant components of the Company’s deferred tax assets and liabilities as of December 31.

(Dollars in thousands)	2012		2011
Deferred tax assets:
Allowance for credit losses	$	6,421	$	5,640
Reserve for off-balance sheet commitments		166		137
Write-downs of other real estate owned		742		346
Net operating loss carry forward		364		212
Deferred income		2,370		2,055
Accrued expenses		1,353		1,450
Loss on termination of cash flow hedge		540		-
Unrealized losses on interest rate caps		803		2,070
Other		55		54
Total deferred tax assets		12,814		11,964
Deferred tax liabilities:
Depreciation		515		612
Purchase accounting adjustments		1,009		680
Deferred capital gain on branch sale		451		473
Deferred gains on interest rate swaps		169		169
Unrealized gains on available-for-sale securities		1,282		928
Other		208		66
Total deferred tax liabilities		3,634		2,928
Net deferred tax assets	$	9,180	$	9,036

No valuation allowance for deferred tax assets was recorded at December 31, 2012 and 2011 as management believes it is more likely than not that all of the deferred tax assets will be realized because they were supported by recoverable taxes paid in prior years and the expected generation of a sufficient level of future taxable income.