Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Income Taxes

13. Income Taxes

For the three and six months ended June 30, 2012, the Company realized federal taxable net operating losses of $14.1 million and $11.9 million, respectively. As of June 30, 2012, the Company had remaining federal net operating loss carryforwards totaling $21.9 million. If not utilized to offset future taxable income, $4.8 million of the net operating loss carryforwards will expire in 2030, $5.2 million will expire in 2031, and $11.9 million will expire in 2032.

As of June 30, 2012, net deferred tax assets, without regard to any valuation allowance, of $33.7 million are recorded in the Company’s Consolidated Balance Sheet. The net deferred tax asset is fully offset by a valuation allowance as a result of uncertainty surrounding the ultimate realization of these tax benefits. Based on the Company’s projections of future taxable income over the next three years, cumulative tax losses over the previous two years, net operating loss carryforward limitations as discussed below, and available tax planning strategies, the Company initially recorded a valuation allowance against the net deferred tax assets in December 2010. The Company’s ongoing analysis indicates that a valuation allowance against the full amount of net deferred tax assets continues to be appropriate at June 30, 2012.

The private placement consummated in October 2010 (the “Private Placement”) was considered a change in control under the Internal Revenue Code and Regulations. Accordingly, the Company was required to evaluate potential limitation or deferral of our ability to carryforward pre-acquisition net operating losses and to determine the amount of net unrealized pre-acquisition built-in losses, which may be subject to similar limitation or deferral. Under the Internal Revenue Code and Regulations, net unrealized pre-acquisition built-in losses realized within 5 years of the change in control are subject to potential limitation, which for the Company is October 7, 2015. Through that date, the Company will continue to analyze its ability to utilize such losses to offset anticipated future taxable income as pre-acquisition built-in losses are ultimately realized. As of June 30, 2012, the Company currently estimates that future utilization of built-in losses of $53 million generated prior to October 7, 2010 will be limited to $1.1 million per year. In addition, the Company currently estimates that $8.0 million to $9.0 million of tax benefits related to the built-in losses may not ultimately be realized. However, this estimate will not be confirmed until the five-year limitation period expires in October 2015.

For the three and six months ended June 30, 2012, income tax provisions of $3.5 million and $4.0 million, respectively, were recorded to reflect an increase in the valuation allowance as a result of a decreased deferred tax liability on net unrealized gains in the Company’s investment securities portfolio.