Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2011
INCOME TAXES

NOTE 18.            INCOME TAXES

 

The components of income tax expense are as follows:

 

    Years Ended December 31,  
    2011     2010     2009  
    (In Thousands)  
                   
Current   $ 13,629     $ 11,570     $ 4,381  
Deferred     (1,240 )     (2,212 )     (1,601 )
Income tax expense   $ 12,389     $ 9,358     $ 2,780  

 

The Company’s total income tax expense differs from the amounts computed by applying the Federal income tax statutory rates to income before income taxes. A reconciliation of the differences is as follows:

 

    Year Ended December 31, 2011  
    Amount     % of Pre-tax
Earnings		  
    (In Thousands)  
Income tax at statutory federal rate   $ 12,540       35.00 %
Effect on rate of:                
State income tax, net of federal tax effect     967       2.70 %
Tax-exempt income, net of expenses     (875 )     -2.44 %
Bank owned life insurance contracts     (137 )     -0.38 %
Incentive stock option expense     128       0.36 %
Other     (234 )     -0.65 %
Effective income tax and rate   $ 12,389       34.59 %

 

    Year Ended December 31, 2010  
    Amount     % of Pre-tax
Earnings		  
    (In Thousands)  
Income tax at statutory federal rate   $ 9,355       35.00 %
Effect on rate of:                
State income tax, net of federal tax effect     715       2.68 %
Tax-exempt income, net of expenses     (773 )     -2.89 %
Incentive stock option expense     144       0.54 %
Other     (83 )     -0.32 %
Effective income tax and rate   $ 9,358       35.01 %

 

    Year Ended December 31, 2009  
    Amount     % of Pre-tax
Earnings		  
    (In Thousands)  
Income tax at statutory federal rate   $ 2,944       34.00 %
Effect on rate of:                
State income tax, net of federal tax effect     214       2.47 %
Tax-exempt income, net of expenses     (477 )     -5.51 %
Incentive stock option expense     224       2.59 %
Other     (125 )     -1.44 %
Effective income tax and rate   $ 2,780       32.11 %

 

The components of net deferred tax asset are as follows:

 

    December 31,  
    2011     2010     2009  
    (In Thousands)  
Other real estate   $ 452     $ 646     $ 411  
Start-up costs     115       127       141  
Net unrealized (gains) losses on securities available for sale and cash flow hedge     (4,220 )     (1,528 )     (810 )
Depreciation     (489 )     (206 )     (304 )
Deferred loan fees     (176 )     (72 )     106  
Allowance for loan losses     8,509       6,974       5,419  
Nonqualified equity awards     436       194       27  
Other     287       231       (118 )
Net deferred income tax assets   $ 4,914     $ 6,366     $ 4,872  

 

The Company believes its net deferred tax asset is recoverable as of December 31, 2011 based on the expectation of future taxable income and other relevant considerations.

 

ASC 740 defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. This section also provides guidance on derecognition, measurement and classification of income tax uncertainties in interim periods. As of December 31, 2011, the Company had no unrecognized tax benefits related to federal or state income tax matters. The Company does not anticipate any material increase or decrease in unrecognized tax benefits during 2012 related to any tax positions taken prior to December 31, 2011. As of December 31, 2011, the Company has accrued no interest or penalties related to uncertain tax positions. It is the Company’s policy to recognize interest and penalties, if any, related to income tax matters in income tax expense.

 

The Company and its subsidiaries file consolidated U.S. federal, State of Alabama and State of Florida income tax returns. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2009 through 2011. The Company is also currently open to audit by the State of Alabama for the years ended December 31, 2009 through 2011, and open to audit by the state of Florida for the year ended 31, 2011, as we opened our first office in the State of Florida in 2011.