24. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table presents summarized quarterly data for each of the years indicated.


	Unaudited
2013:	First Quarter		Second Quarter			Third Quarter			Fourth Quarter			Total
	(Dollars in thousands, except per share data)
Interest income	$	16,436	$	15,987		$	16,009		$	16,312		$	64,744
Interest expense		3,519		3,351			3,305			3,238			13,413

Net interest income		12,917		12,636			12,704			13,074			51,331
Provision for loan losses		2,064		1,113			657	(1)		282			4,116

Net interest income after provision for loan losses		10,853		11,523			12,047			12,792			47,215
Non-interest income		5,693		6,384			3,548	(2)		4,124			19,749
Non-interest expenses		13,864		14,368			13,528			14,977			56,737

Income before taxes		2,682		3,539			2,067			1,939			10,227
Income tax expense (benefit)(3)		—		150			350			(300	)		200

Net income (loss)	$	2,682	$	3,389		$	1,717		$	2,239		$	10,027

Earnings (loss) per share:
Basic earnings (loss)	$	0.06	$	(0.06	)	$	0.03		$	0.04		$	0.07
Diluted earnings (loss)		0.06		(0.06	)		0.03			0.04			0.07

1.	The decrease in provision for loan losses in the third quarter was due primarily to a recovery of $1.9 million resulting from the sale of one nonperforming loan.

The decline in noninterest income in the third quarter was driven by no gains recognized on sales of available for sale securities. Further impacting the decline was lower mortgage banking income due to fewer loans originated for sale. The rise in longer-term rates in the second quarter negatively impacted the volume of loans originated for sale in the subsequent quarters.

The Company recognized income tax expense of $200,000 for the year ended December 31, 2013 as a result of a 2013 alternative minimum tax (AMT) liability. While the Company has significant net operating loss (NOL) carryforwards available to offset taxable income for both regular tax and AMT purposes, tax laws only permit the AMT NOL carryforward to offset 90% of current year taxable income for purposes of determining the AMT liability. Thus, an AMT liability of $200,000 was generated for the current year by applying the AMT rate of 20% to AMT taxable income. While tax laws permit the Company to carry forward this $200,000 in the form of an AMT credit to be used in future periods, the resulting deferred tax benefit is fully offset by a valuation allowance. The changes related to income tax expense, from quarter to quarter, are due to changes in estimates of AMT taxable income during the year.


	Unaudited
2012:	First Quarter		Second Quarter		Third Quarter			Fourth Quarter		Total
	(Dollars in thousands, except per share data)
Interest income	$	21,562	$	20,894	$	18,191		$	17,797	$	78,444
Interest expense		5,683		4,474		4,063			3,786		18,006

Net interest income		15,879		16,420		14,128			14,011		60,438
Provision for loan losses		680		6,264		30,279	(1)		2,102		39,325

Net interest income after provision for loan losses		15,199		10,156		(16,151	)		11,909		21,113
Non-interest income		5,091		6,949		3,752	(2)		6,939		22,731
Non-interest expenses		16,494		17,043		17,330			14,302		65,169

Income (loss) before taxes		3,796		62		(29,729	)		4,546		(21,325	)
Income tax expense (benefit)(3)		—		—		(2,838	)		1,950		(888	)

Net income (loss)	$	3,796	$	62	$	(26,891	)	$	2,596	$	(20,437	)

Earnings (loss) per share:
Basic earnings (loss)	$	0.12	$	—	$	(0.82	)	$	0.08	$	(0.62	)
Diluted earnings (loss)		0.12		—		(0.82	)		0.08		(0.62	)

1.	The increase in provision for loan losses in the third quarter was due primarily to a bulk sale of nonperforming assets.

The decline in noninterest income in the third quarter was driven by lower gains recognized on a lower volume of sales of available for sale securities. Further impacting the decline was the recognition in the third quarter of the valuation allowance on certain properties to absorb estimated closing costs at the time of disposal.

The Company recognized a tax benefit of $888,000 for the year ended December 31, 2012, because it was both (i) in a pre-tax operating loss position, and (ii) had unrealized gains on available for sale securities in its securities portfolio that were recorded in other comprehensive income. Beginning in the third quarter, the Company both recognized a pre-tax operating loss and at the same time, had unrealized gains on available for sale securities recorded in other comprehensive income. As a result, the tax benefit recognized in the third quarter was equal to the current year-to-date change (through September) in other comprehensive income multiplied by the Company’s statutory tax rate of 35%. In the fourth quarter, the year-to-date change in other comprehensive income had compressed, causing a reduction in the benefit previously recognized, and resulting in income tax expense for the quarter.