Income Taxes (Tables)

6 Months Ended

Jun. 30, 2013

The following table presents the provision for income taxes for the six months ended June 30, 2013 and 2012:



	2013			2012
	(in thousands)
Current:
Federal	$	(134	)	$	45
State	—			—
	(134		)	45
Deferred:
Federal	4,324			1,196
State	1,016			376
	5,340			1,572
Decrease in valuation allowance for deferred tax assets	—			(11,000		)
Total income taxes	$	5,206		$	(9,383	)

Deferred tax assets, net

The following table presents the tax effects of significant components of the Company's net deferred tax assets as of June 30, 2013 and December 31, 2012:



	June 30,			December 31,
	2013			2012
	(in thousands)
Deferred tax assets:
Allowance for loan losses	$	8,978		$	9,853
Other than temporary impairment	842			827
Accrued liabilities	199			220
OREO property	149			3,767
Net operating loss	18,715			19,627
Mortgage goodwill	856			921
Unrealized loss on available-for-sale securities	623			—
Other	2,043			2,160
	32,405			37,375
Less: Valuation Allowance	—			—
	$	32,405		$	37,375

Deferred tax liabilities:
Unrealized gain on available-for-sale securities	$	—		$	(2,583	)
FMV adjustment related to mergers	(135		)	(181		)
Depreciation	(1,561		)	(1,561		)
Prepaid expenses	(358		)	(358		)
Core deposit intangible	(905		)	(1,043		)
Noncompete intangible	(149		)	(149		)
Other	(72		)	(142		)
	$	(3,180	)	$	(6,017	)
Net deferred tax assets	$	29,225		$	31,358

Schedule of Cumulative Loss Position



	June 30, 2013
	Cumulative Loss Test
	2010*			2011			2012			2013**		Total
Income (loss) before income taxes	$	(3,334	)	$	(7,701	)	$	(32,635	)	$	14,664	$	(29,006	)
Goodwill impairment	—			4,944			—			—		4,944
	$	(3,334	)	$	(2,757	)	$	(32,635	)	$	14,664	$	(24,062	)

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, 2012		Expiration
	(in thousands)
Cardinal State Bank acquisition	$	2,424	2029
American Community Bank acquisition	345		2030
Yadkin Federal Tax	47,892		2031
Yadkin 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 six months ended June 30, 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	$	5,132		$	1,780
Increases (decreases) resulting from:
Tax-exempt interest on investments	(494		)	(409		)
State income tax, net of federal benefits	660			245
Income from bank-owned life insurance	(106		)	(110		)
Valuation allowance on deferred tax assets	—			(11,000		)
Other	14			111
Total income taxes	$	5,206		$	(9,383	)