Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes [Text Block]

(16)     Income Taxes

The income tax provision consists of the following for the years ended December 31, 2011 and 2010:

(in thousands)	2011			2010
Current:
Federal	$	3		$	—
State	68			—
Deferred:
Federal	312			(532		)
State	79			(281		)
	462			(813		)
Valuation allowance	(391		)	813
Income tax provision	$	71		$	—

During the year ended December 31, 2011, the Company recorded a tax expense of approximately $71,000, primarily related to amounts due for California State taxes.  The taxes owed in connection with pre-tax earnings would have typically been entirely offset by the Company’s net operating loss carryforwards, however, the State temporarily suspended the use of these carryforwards for the year ended December 31, 2011, and, as a result, the Company has recorded a tax liability for that period.  Going forward, the Company does not anticipate owing any substantial taxes for Federal or State purposes, until the Company’s net operating losses are fully utilized.  During the year ended December 31, 2010, the Company did not record an income tax provision.

A reconciliation of the amounts computed by applying the federal statutory rate of 34% for 2011 and 2010 to the loss before income tax provision and the effective tax rate are as follows:

	2011					2010
(dollars in thousands)	Amount			Percent of Pretax		Amount			Percent of Pretax
Federal income tax provision (benefit) at statutory rate	$	373		34	%	$	(667	)	(34	)%
Changes due to:
State franchise tax, net of federal income tax	78			7	%	(140		)	(7	)%
Effect of meals and entertainment	42			4	%	32			2	%
State Enterprise Zone Tax Deduction	(18		)	(2	)%	(54		)	(3	)%
Valuation allowance	(391		)	(35	)%	813			41	%
Other, net	(13		)	(1	)%	16			1	%
Total income tax provision	$	71		7	%	$	—		—	%

The major components of the net deferred tax assets and liabilities at December 31, 2011 and 2010 are as follows:

(in thousands)	2011			2010
Deferred tax assets:
Net operating losses	$	3,502		$	3,767
Allowance for loan losses	1,477			1,446
Equity compensation	603			562
Other	245			675
Valuation allowance	(5,689		)	(6,080		)
Total deferred tax assets	138			370
Deferred tax liabilities:
Prepaid expenses	81			313
Federal Home Loan Bank stock dividends	57			57
Net unrealized gains on investment securities	1,095			586
Total deferred tax liabilities	1,233			956
Net deferred tax liabilities	$	(1,095	)	$	(586	)

A valuation allowance is required if it is “more likely than not” that a deferred tax asset will not be realized.  The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment concerning management’s evaluation of both positive and negative evidence, including historic financial performance, the forecasts of future income, existence of feasible tax planning strategies, length of statutory carryforward periods, and assessments of the current and future economic and business conditions.  Management evaluates the positive and negative evidence and determines the realizability of the deferred tax asset on a quarterly basis.

During the year ended December 31, 2009, we established a full valuation allowance against the Company’s deferred tax assets after we determined that it is “more likely than not” that the Company will not be able to realize the benefit of the deferred tax asset.  During the years ended December 31, 2011 and 2010, management reassessed the continuing need for this valuation allowance and determined that as of December 31, 2011 and 2010, it was appropriate to maintain a full valuation allowance against the Company’s deferred tax assets.  Management reached this conclusion as a result of the Company’s cumulative losses since inception, and the near term economic climate in which the Company operates.  Management will continue to evaluate the potential realizability of the deferred tax assets and will continue to maintain a valuation allowance to the extent it is determined that it is more likely than not that these assets will not be realized.

At December 31, 2011 and 2010, the Company maintained a deferred tax liability of $1.1 million and $586,000, respectively, in connection with net unrealized gains on investment securities, and is included in Accrued Interest and Other Liabilities within the accompanying Consolidated Balance Sheets.  We did not utilize this deferred tax liability to reduce our tax valuation allowance due to the fact that we do not currently intend to dispose of these investments and realize the associated gains.

As of December 31, 2011, the Company had federal and state net operating loss carryforwards of approximately $8.1 million and $10.6 million, respectively.  As of December 31, 2010, the Company had federal and state net operating loss carryforwards of approximately $8.7 million and $11.2 million, respectively.  For federal tax purposes, the Company’s NOL carryforwards expire beginning in 2024, and for California tax purposes, the Company’s NOL carryforwards expire beginning in 2018.

No uncertain tax positions were identified as of December 31, 2011 and 2010, and the Company had no tax reserve for uncertain tax positions at December 31, 2011 and December 31, 2010.  The Company does not anticipate providing a reserve for uncertain tax positions in the next twelve months.  Furthermore, the Company has elected to record interest accrued and penalties related to unrecognized tax benefits in tax expense.  At December 31, 2011 and 2010, the Company did not have an accrual for interest and/or penalties associated with uncertain tax positions.

The Company files income tax returns in the U.S. federal and California jurisdictions.  With few exceptions, the Company is not subject to U.S. federal, state, local, or non-U.S. income tax examinations by tax authorities for years before 2007.