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Income Taxes
12 Months Ended
Dec. 31, 2012
Income Taxes  
Income Taxes

(9) Income Taxes

        Income tax (benefit) consisted of the following for the year ended December 31, as follows:

 
  2012   2011   2010  
 
  (Dollars in thousands)
 

Currently (refundable) payable tax:

                   

Federal

  $ 2,944   $ 89   $ (2,281 )

State

    51     140     (44 )
               

Total currently (refundable) payable

    2,995     229     (2,325 )

Deferred tax (benefit):

                   

Federal

    292     2,068     (4,849 )

State

    1,007     569     (2,292 )

Deferred tax valuation allowance

        (3,700 )   3,700  
               

Total deferred tax (benefit)

    1,299     (1,063 )   (3,441 )
               

Income tax (benefit)

  $ 4,294   $ (834 ) $ (5,766 )
               

        The effective tax rate differs from the federal statutory rate for the years ended December 31, as follows:

 
  2012   2011   2010  

Statutory Federal income tax rate

    35.0 %   35.0 %   -35.0 %

State income taxes, net of federal tax benefit

    4.7 %   4.4 %   -2.7 %

Change in valuation allowance

    0.0 %   -35.1 %   6.0 %

Low income housing credits

    -6.0 %   -8.0 %   -1.7 %

Goodwill impairment

    0.0 %   0.0 %   24.5 %

Increase in cash surrender value of life insurance

    -4.2 %   -5.7 %   -1.0 %

Non-taxable interest income

    -0.3 %   0.0 %   -0.1 %

Other, net

    1.0 %   1.5 %   0.6 %
               

Effective tax rate

    30.2 %   -7.9 %   -9.4 %
               

        Deferred tax assets and liabilities that result from the tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes at December 31, are as follows:

 
  2012   2011  
 
  (Dollars in thousands)
 

Deferred tax assets:

             

Allowance for loan losses

  $ 8,000   $ 8,704  

Defined postretirement benefit obligation

    8,956     8,064  

Tax credit carryforwards

    5,296     4,876  

Federal net operating loss carryforwards

        1,289  

California net operating loss carryforwards

    2,281     3,164  

Split-dollar life insurance benefit plan

    103     106  

Stock compensation

    1,517     1,276  

Accrued expenses

    794     728  

Fixed assets

    678     626  

Other

    247     221  
           

Total deferred tax assets

    27,872     29,054  

Deferred tax liabilities:

             

Securities available-for-sale

    (5,033 )   (3,615 )

FHLB stock

    (263 )   (263 )

Prepaid expenses

    (359 )   (416 )

I/O strips

    (1,036 )   (879 )

Loan fees

    (908 )   (830 )

Intangible assets

    (841 )   (1,047 )

Other

    (168 )   (134 )
           

Total deferred tax liabilities

    (8,608 )   (7,184 )
           

Net deferred tax assets

  $ 19,264   $ 21,870  
           

        Tax credit carryforwards as of December 31, 2012 consist of the following:

 
  2012    
 
  (Dollars in thousands)
   

Low income housing credits

  $ 4,339   (begin to expire in 2028)

Alternative Minimum Tax credits

    870   (no expiration date)

State tax credits, net of federal tax effects

    85   (no expiration date)

New Hire Retention Credit

    2   (expires in 2031)
         

Total tax credit carryforwards

  $ 5,296    
         

        The Company does not have the ability to carryback its net operating loss and low income housing credits to recover federal income taxes paid in prior years. Under current California law, the Company cannot recover state income taxes paid in prior years.

        At year-end 2012, the Company has a California net operating loss carryforward of approximately $32,379,000 that will begin to expire in 2031, if not utilized to reduce future taxable income.

        Under generally accepted accounting principles, a valuation allowance is required if it is "more likely than not" that a deferred tax asset will not be realized. The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment concerning management's evaluation of both positive and negative evidence, including forecasts of future income, cumulative losses, applicable tax planning strategies, and assessments of current and future economic and business conditions.

        At December 31, 2012, and December 31, 2011, the Company had net deferred tax assets of $19,264,000 and $21,870,000, respectively. At December 31, 2012, the Company determined that a valuation allowance for deferred tax assets was not necessary.

        The Company and its subsidiaries are subject to U.S. Federal income tax as well as income tax of the State of California. The Company is no longer subject to examination by federal and state taxing authorities for years before 2009 and 2008, respectively.