Income Taxes

9 Months Ended

Sep. 30, 2012

Income Taxes [Abstract]

Income Taxes

(9) Income Taxes

The Company uses an asset and liability approach to accounting for income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets are recognized if it is more likely than not that a future benefit will be realized. The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes,” which prescribes the recognition and measurement criteria related to tax positions taken or expected to be taken in a tax return. The Company had unrecognized tax benefits including interest of approximately $32,000 as of September 30, 2012. The Company recognizes interest and penalties accrued relating to unrecognized tax benefits in income tax expense.

Realization of deferred tax assets associated with the net operating loss carryforwards is dependent upon generating sufficient taxable income prior to their expiration. During 2012, the Bank set up a state valuation allowance of $835 thousand to reflect management’s estimates of projected income and inability to utilize the state net operating loss carryforward.

At September 30, 2012, the Bank had a federal net operating loss of $28 million, of which approximately $16 million will be carried back to tax years 2010 and 2011, and $12 million will be available to reduce future taxable income and expire in various dates through 2032.