Income Taxes (Tables)

9 Months Ended

Sep. 30, 2012

Income Tax Disclosure [Abstract]

Provision for income taxes

The following table presents the provision for income taxes for the nine months ended September 30, 2012 and 2011:

	2012			2011
	(in thousands)
Current:
Federal	$	(342	)	$	1,627
State	—			—
	(342		)	1,627
Deferred:
Federal	1,575			(5,120		)
State	438			(602		)
	2,013			(5,722		)
Increase (decrease) in valuation allowance for deferred tax assets	(11,000		)	11,000
Total income taxes	$	(9,329	)	$	6,905

Deferred tax assets, net

	September 30,			December 31,
	2012			2011
	(in thousands)
Deferred tax assets:
Allowance for loan losses	$	10,671		$	12,880
Other than temporary impairment	807			807
Accrued liabilities	213			276
OREO property	1,594			1,268
Net operating loss	6,511			7,281
Sidus goodwill	953			1,050
Other	1,887			1,798
	22,636			25,360
Less: Valuation Allowance	—			(11,000		)
	$	22,636		$	14,360
Deferred tax liabilities:
Unrealized gain on available-for-sale securities	$	(3,002	)	$	(2,387	)
FMV adjustment related to mergers	(177		)	(255		)
Depreciation	(1,688		)	(1,980		)
Prepaid expenses	(358		)	(327		)
Core deposit intangible	(1,146		)	(1,468		)
Noncompete intangible	(149		)	(149		)
Other	(146		)	(195		)
	$	(6,666	)	$	(6,761	)
Net deferred tax asset	$	15,970		$	7,599

Schedule of Cumulative Loss Position

	September 30, 2012 Cumulative Loss Test
	2009*		2010			2011			2012**		Total
Income (loss) before income taxes	$	6,545	$	(1,402	)	$	(7,701	)	$	5,897	$	(3,206	)
Goodwill impairment	—		—			4,944			—		4,944
	$	6,545	$	(1,402	)	$	(2,757	)	$	5,897	$	1,738

*

Summary of loss carryforwards

The expiration of the loss carryforwards for the tax period ending December 31, 2012 are as follows:

Significance: Moderate

	Net Operating Loss  Carryforward at December 31, 2011		Expiration
	(in thousands)
Cardinal State Bank acquisition	$	2,424	2029
American Community Bank acquisition	345		2030
Yadkin Valley Federal Tax	14,517		2031
Yadkin Valley State Tax	16,166		2031
Total Loss Carryforwards	$	33,452

Reconciliation of effective tax rate

The following table presents a reconciliation of applicable income taxes for the nine months ended September 30, 2012 and 2011 to the amount of tax expense computed at the statutory federal income tax rate of 35%:

	2012			2011
	(in thousands)
Tax expense (benefit) at statutory rate on income before income taxes	$	2,064		$	(3,645	)
Increases (decreases) resulting from:
Tax-exempt interest on investments	(589		)	(651		)
State income tax, net of federal benefits	285			(391		)
Income from bank-owned life insurance	(166		)	(172		)
Valuation allowance on deferred tax assets	(11,000		)	11,000
Other	77			764
Total income taxes	$	(9,329	)	$	6,905