The components of the provision (benefit) for income taxes for the last three years were:

The deferred Federal and State tax expense includes a benefit from the full reversal of the deferred tax asset valuation allowance of $23.5 million for the year ended December 31, 2011.

The reconciliation between the Company’s effective tax rate on income (loss) and the statutory rate is as follows:

Based on evaluation of the positive and negative evidence, management determined it was appropriate to establish a deferred tax asset valuation allowance of $21.0 million as of December 31, 2009, and an allowance of $23.5 million as of December 31, 2010. Based on the analysis of positive and negative evidence at December 31, 2011, including the Company’s return to profitability over the last six consecutive quarters, no deferred tax asset valuation allowance was deemed necessary as of December 31, 2011. As a result, the deferred tax asset valuation allowance of $23.5 million was reversed in the fourth quarter of 2011.

Net deferred taxes are included in other assets on the Company’s balance sheet. The tax effect of temporary differences that give rise to significant components of deferred tax assets and deferred tax liabilities as of December 31, 2011, and 2010, are presented below:

(Dollars in thousands)	December 31,
	2011		2010
Deferred tax assets:
Allowance for loan losses	$	13,532	$	15,455
Reserve for unfunded commitments		296		327
Deferred employee benefits		2,247		1,768
Stock option and restricted stock		732		973
Valuation allowance on OREO		3,133		2,914
Capitalized OREO expenses		1,050		988
Taxable interest on nonaccrual loans		2,646		2,207
State net operating loss carryforwards		3,093		3,195
State business energy and low income housing tax credits		770		631
Federal low income housing tax credits		1,776		2,313
Other		3,085		3,514
Total gross deferred tax assets		32,360		34,285

Deferred tax liabilities:
Accumulated depreciation		957		868
Net unrealized gain on investments available for sale		4,813		327
Loan origination costs		1,610		1,645
Federal Home Loan Bank stock dividends		1,893		1,893
Intangible assets		-		138
Other		123		161
Total gross deferred tax liabilities		9,396		5,032
Net deferred tax assets before valuation allowance		22,964		29,253
Deferred tax asset valuation allowance		-		(23,464	)
Net deferred tax assets	$	22,964	$	5,789

Primarily as a result of the Company reversing its deferred tax asset valuation allowance in 2011, the Company’s net deferred tax asset increased by $17.2 million to $23.0 million at December 31, 2011.

At December 31, 2011, the Company has state tax net operating loss carryforwards of $3.1 million and state tax credit carryforwards of $.8 million. In addition, the Company has $1.8 million of federal tax credits. The following table summarizes the expiration dates of federal tax credits and state net operating loss and tax credit carryforwards:

(Dollars in thousands)
Year of expiration	Type	Amount
2023-2026	State net operating losses	$	3,093
2016-2019	State tax credits- business energy		654
2013-2016	State tax credits- low income housing		116
2028-2031	Federal tax credits- low income housing		1,776

Bancorp is subject to U.S. federal income taxes and State of Oregon income taxes. The years 2008 through 2011 remain open to examination for federal income taxes, and years 2008 through 2011 remain open for State examination. As of December 31, 2011, and 2010, Bancorp had no unrecognized tax benefits or uncertain tax positions. Bancorp had no accrued interest or penalties as of December 31, 2011.