Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

(21)   Income Taxes

On February 3, 2011, the company converted from a Florida limited liability company to a Florida corporation (the "conversion"). Prior to the conversion the company was treated as a partnership for federal and state income tax purposes. As a partnership our taxable income and losses were attributed to our members, and accordingly, no provision or liability for income taxes was reflected in the accompanying consolidated financial statements for periods prior to the conversion.

Pre-tax net income for the six months ended June 30, 2011 was approximately $21.2 million. Excluding the tax effects of the corporate conversion and pre-conversion losses, the tax provision calculated using an estimated annual effective tax rate of 38.6% is approximately $8.2 million before discrete adjustments described below.

During the first quarter of 2011, and prior to February 3, 2011 (conversion date), the company incurred pre-conversion losses attributed to our members of approximately $1.9 million, the tax-effect of which is $749,000. This pre-conversion amount is treated as a discrete adjustment to the tax provision calculated above as the company obtains no benefit from these losses. In addition, these pre-conversion results were not taken into account in determining the company's estimated annual effective tax rate of 38.6%.

As a result of the conversion of the company from a partnership to a corporation, the company recorded a one-time deferred tax liability of approximately $4.4 million for the federal and state tax effects of cumulative differences between financial and tax reporting which existed at the time of the conversion. Pursuant to ASC 740 these deferred taxes were recorded in income tax expense for the first quarter of 2011. In the second quarter, the deferred tax liability was increased by $175,000 to account for changes in the estimated differences at the date of conversion.

Following the conversion and prior to the initial public offering, one of the founding members entered into a reorganization that allowed the company to assume the corporate shareholder's tax attributes. These tax attributes include approximately $11.2 million of net operating loss carryovers ("NOLs"). During the second quarter, the Company completed an evaluation of this transaction and determined that the Company was entitled to assume the NOLs of this founding member. Accordingly, in the second quarter the Company has recorded a one-time deferred tax asset of approximately $4.3 million related to these tax attributes and this amount was recorded as an income tax benefit during the period.

The components of the deferred tax liability as of June 30, 2011 are as follows (in thousands):

	June 30,
	2011
Total tax provision	$	9,179
Deferred taxes on unrealized gain on securities available for sale		22
Deferred tax liability		9,201

The overall income tax provision for six months ended June 30, 2011 is approximately $9.2 million. As described above, this total is derived from applying the annual effective tax rate to the post-conversion (no effect given to pre-conversion losses) quarterly earnings and the one-time establishment of deferred taxes due to the conversion from pass-through status to corporate status and the inclusion of NOLs acquired from one of our founding members.

The following table summarizes the tax provision (in thousands):

	First		Second			Year to
	Quarter		Quarter			Date
Impact of pre-tax book income at estimated annual tax rate	$	2,869	$	5,328		$	8,197
Pre-conversion losses		749		—			749
Opening deferred tax liability		4,378		175			4,553
Net operating loss deferred tax asset		—		(4,320	)		(4,320	)
Total tax provision	$	7,996	$	1,183		$	9,179

The principal difference between the estimated annual effective tax rate and the federal tax rate of 35% is attributed to state taxes.

At June 30, 2011, income taxes payable includes an estimated liability for unrecognized tax benefits of $6.3 million that was charged to paid-in-capital related to the initial public offering.