Income Taxes (Tables)

3 Months Ended

Mar. 31, 2013

The following table presents the provision for income taxes for the three months ended March 31, 2013 and 2012:



	2013			2012
	(in thousands)
Current:
Federal	$	(200	)	$	—
State	—			—
	(200		)	—
Deferred:
Federal	2,307			954
State	501			251
	2,808			1,205
Increase (decrease) in valuation allowance for deferred tax assets	—			(1,205		)
Total income taxes	$	2,608		$	—

Deferred tax assets, net



	March 31,			December 31,
	2013			2012
	(in thousands)
Deferred tax assets:
Allowance for loan losses	$	9,595		$	9,853
Other than temporary impairment	842			827
Accrued liabilities	199			220
OREO property	900			3,767
Net operating loss	20,063			19,627
Mortgage goodwill	888			921
Other	1,979			2,160
	34,466			37,375
Less: Valuation Allowance	—			—
	$	34,466		$	37,375

Deferred tax liabilities:
Unrealized gain on available-for-sale securities	$	(2,350	)	$	(2,583	)
FMV adjustment related to mergers	(154		)	(181		)
Depreciation	(1,561		)	(1,561		)
Prepaid expenses	(358		)	(358		)
Core deposit intangible	(973		)	(1,043		)
Noncompete intangible	(149		)	(149		)
Other	(139		)	(142		)
	$	(5,684	)	$	(6,017	)
Net deferred tax asset	$	28,782		$	31,358

Schedule of Cumulative Loss Position



	March 31, 2013
	Cumulative Loss Test
	2010*			2011			2012			2013**		Total
Income (loss) before income taxes	$	(3,072	)	$	(7,701	)	$	(32,635	)	$	7,257	$	(36,151	)
Goodwill impairment	—			4,944			—			—		4,944
	$	(3,072	)	$	(2,757	)	$	(32,635	)	$	7,257	$	(31,207	)

Summary of loss carryforwards



	Net Operating Loss Carryforward at December 31, 2012		Expiration
	(in thousands)
Cardinal State Bank acquisition	$	2,424	2029
American Community Bank acquisition	345		2030
Yadkin Valley Federal Tax	47,892		2031
Yadkin Valley State Tax	46,324		2031
Total Loss Carryforwards	$	96,985

Reconciliation of effective tax rate

The following table presents a reconciliation of applicable income taxes for the three months ended March 31, 2013 and 2012 to the amount of tax expense computed at the statutory federal income tax rate of 35%:



	2013			2012
	(in thousands)
Tax expense at statutory rate on income before income taxes	$	2,540		$	1,215
Increases (decreases) resulting from:
Tax-exempt interest on investments	(219		)	(156		)
State income tax, net of federal benefits	326			163
Income from bank-owned life insurance	(53		)	(55		)
Valuation allowance on deferred tax assets	—			(1,205		)
Other	14			38
Total income taxes	$	2,608		$	—