19. INCOME TAXES

The income tax expense (benefit) consists of the following:

SUMMARY OF INCOME TAX EXPENSE (BENEFIT)


Years Ended December 31,	2014		2013		2012
Current	$	4	$	—	$	(34	)
Deferred		1,313		297		—

Income tax provision (benefit)	$	1,317	$	297	$	(34	)

Items that gave rise to significant portions of the deferred tax accounts are as follows:

DETAILS OF DEFERRED TAX ASSET (LIABILITY), NET


December 31,	2014			2013
Deferred tax asset:
Allowance for loan losses	$	9,742		$	14,702
Impairments realized on investment securities		490			490
Fixed assets		4,720			4,354
Net operating loss carry forwards		111,593			96,117
Unrealized loss on investment securities		95			4,872
Alternative minimum tax credits		2,010			2,010
Other		6,603			4,585

Total deferred tax asset before valuation allowance		135,253			127,130

Less: valuation allowance		(132,646	)		(119,349	)
Deferred tax liability:
Core deposit intangible amortization		—			103
Goodwill amortization		1,610			297
Deferred loan costs		2,211			2,496
Other		300			310

Total deferred tax liability		4,121			3,206

Net deferred tax (liability) asset	$	(1,514	)	$	4,575

The Company has $264.3 million of federal net operating loss carryforwards at December 31, 2014 of which $38.4 million will expire in 2030, $112.5 million will expire in 2031, $50.0 million will expire in 2032, $25.7 million will expire in 2033 and $37.7 million will expire in 2034. The Bank also has $326.5 million of state net operating loss carryforwards at December 31, 2014 of which $3.0 million expire in 2015, $37.43 million expire in 2029, $74.7 million expire in 2030, $109.8 million expire in 2031, $45.2 million expire in 2032, $22.3 million expire in 2033 and $34.1 million expire in 2034.

At December 31, 2014, the Company had a valuation allowance of $132.6 million against the gross deferred tax asset as it is more likely than not that the full deferred tax asset will not be realized. Management considered all positive and negative evidence regarding the ultimate ability to fully realize the deferred tax assets, including past operating results and the forecast of future taxable income. In addition, the Company is a three-year cumulative loss company. The net deferred tax liability of $1.5 million relates primarily to deferred taxes owed on indefinite-lived intangible assets. Tax expense of $1.3 million and $297 thousand was recorded in 2014 and 2013, respectively, relating to the deferred tax liability on the Company’s indefinite-lived intangible assets that is not available to offset existing deferred tax assets.

The provision for income taxes differs from that computed at the statutory rate as follows:

RECONCILIATION OF FEDERAL STATUTORY INCOME TAX


Years Ended December 31,	2014						2013						2012
	Amount			%			Amount			%			Amount			%
Loss before income taxes	$	(28,491	)				$	(9,646	)				$	(50,525	)
Tax computed at statutory rate		(9,972	)		35.0	%		(3,377	)		35.0	%		(17,683	)		35.0	%
(Decrease) increase in charge resulting from:
State taxes, net of federal benefit		(1,606	)		5.6			(635	)		6.6			(3,040	)		6.0
Tax exempt interest (net)		(469	)		1.7			(530	)		5.5			(638	)		1.3
BOLI		(664	)		2.3			(659	)		6.8			(695	)		1.4
Valuation allowance		13,297			(46.7	)		5,067			(52.5	)		21,981			(43.5	)
Other, net		731			(2.5	)		431			(4.5	)		41			(0.1	)

Total income tax expense (benefit)	$	1,317			(4.6	)%	$	297			(3.1	)%	$	(34	)		0.1	%

FASB ASC 740 clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined in ASC 740 as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740 was applied to all existing tax positions upon initial adoption. There was no liability for uncertain tax positions and no known unrecognized tax benefits at December 31, 2014 or 2013.

The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the results of operations. As of December 31, 2014, the 2011 through 2014 tax years were subject to examination by the Internal Revenue Service (the “IRS”) and to state examination. During 2012, the IRS completed its examination of the Company’s 2008 through 2010 tax returns, which did not result in any material change to the Company’s tax position.