Income Taxes (Tables)

3 Months Ended

Mar. 31, 2014

The following table presents the provision for income taxes for the nine months ended March 31, 2014 and 2013:



	2014			2013
	(in thousands)
Current:
Federal	$	(1	)	$	(200	)
State	—			—
	(1		)	(200		)
Deferred:
Federal	2,210			2,307
State	450			501
	2,660			2,808
Decrease in valuation allowance for deferred tax assets	—			—
Total income taxes	$	2,659		$	2,608

Deferred tax assets, net

The following table presents the tax effects of significant components of the Company's net deferred tax assets as of March 31, 2014 and December 31, 2013:



	March 31,			December 31,
	2014			2013
	(in thousands)
Deferred tax assets:
Allowance for loan losses	$	6,360		$	6,956
Other than temporary impairment	829			829
Accrued liabilities	43			55
OREO property	112			178
Net operating loss	13,285			14,375
Mortgage goodwill	747			779
Unrealized loss on available-for-sale securities	—			—
Other	2,480			3,243
	23,856			26,415
Less: Valuation Allowance	—			—
	$	23,856		$	26,415

Deferred tax liabilities:
Unrealized gain on available-for-sale securities	$	(484	)	$	(3	)
FMV adjustment related to mergers	(116		)	(97		)
Depreciation	(1,887		)	(1,753		)
Prepaid expenses	(342		)	(342		)
Core deposit intangible	(704		)	(765		)
Noncompete intangible	(11		)	(24		)
Other	(7		)	(6		)
	$	(3,551	)	$	(2,990	)
Net deferred tax assets	$	20,305		$	23,425

Schedule of Cumulative Loss Position



	March 31, 2014
	Cumulative Loss Test
	2011*			2012			2013		2014**		Total
Income (loss) before income taxes	$	(6,406	)	$	(32,635	)	$	29,227	$	6,567	$	(3,247	)
Goodwill impairment	4,944			—			—		—		4,944
	$	(1,462	)	$	(32,635	)	$	29,227	$	6,567	$	1,697

Summary of loss carryforwards

The expiration of the loss carryforwards for the tax period ending March 31, 2014 are as follows:



	Net Operating Loss Carryforward March 31, 2014		Expiration
	(in thousands)
Cardinal State Bank acquisition	$	2,424	2029
American Community Bank acquisition	345		2030
Yadkin Federal Tax	32,868		2031
Yadkin State Tax	24,827		2031
Total Loss Carryforwards	$	60,464

Reconciliation of effective tax rate

The following table presents a reconciliation of applicable income taxes for the three months ended March 31, 2014 and 2013 to the amount of tax expense computed at the statutory federal income tax rate of 35%:



	2014			2013
	(in thousands)
Tax expense at statutory rate on income before income taxes	$	2,299		$	2,540
Increases (decreases) resulting from:
Tax-exempt interest on investments	(253		)	(219		)
State income tax, net of federal benefits	292			326
Income from bank-owned life insurance	(48		)	(53		)
Non-deductible merger expenses	360			—
Other	9			14
Total income taxes	$	2,659		$	2,608