Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes [Abstract]

Income Taxes

Note 12. Income Taxes

In accordance with current income tax accounting guidance, the Company assessed whether a valuation allowance should be established against their deferred tax assets ("DTAs") based on consideration of all available evidence using a "more likely than not" standard. The most significant portions of the deductible temporary differences relate to (1) net operating loss carryforwards (2) the allowance for loan losses and (3) fair value adjustments or impairment write-downs related to securities.

In assessing the need for a valuation allowance, both the positive and negative evidence about the realization of DTAs were evaluated. The ultimate realization of DTAs is based on the Company's ability to carryback net operating losses to prior tax periods, tax planning strategies that are prudent and feasible, and the reversal of deductible temporary differences that can be offset by taxable temporary differences and future taxable income.

After evaluating all of the factors previously summarized and considering the weight of the positive evidence compared to the negative evidence, the Company determined a full valuation adjustment was necessary as of December 31, 2010 and September 30, 2011. A three year cumulative loss position and continued near-term losses represent negative evidence that cannot be overcome with future taxable income.

Below is a summary of items included in the deferred tax inventory as of September 30, 2011 and December 31, 2010:

	Balance at 09/30/11	Balance at 12/31/10	Change
Allowance for loan loss	$       9,005	$    12,172	$          (3,167)
Impairment on securities portfolio	8,058	7,865	193
Net operating loss carryforwards	18,577	11,480	7,097
Valuation adjustments on OREO property	2,747	1,989	758
Basis adjustments from merger	(1,392)	(1,577)	185
Mortgage servicing rights	(831)	(937)	106
All other	(795)	481	(1,276)
Net deferred tax before allowance	$35,369	$31,473	$3,896
Valuation allowance	(35,369)	(31,473)	(3,896)
Net deferred tax assets	$                -	$                -	$                    -