California Bank of Commerce NOTES TO FINANCIAL STATEMENTS 8.  INCOME TAXES  (Continued) Deferred tax assets (liabilities) consisted of the following: December 31,  2011 2010 Deferred tax assets: Net operating losses  $  823,067 $  1,195,390 Share-based compensation 186,303 166,824 Organization costs 322,350 352,928 Allowance for loan losses  1,301,339 1,421,193 State deferred tax asset  774,068 731,209 Other 170,362 19,266 Deferred tax assets before valuation allowance 3,577,489 3,886,810 Valuation allowance  (141,979)  (141,979) Total deferred tax assets  3,435,510 3,744,831 Deferred tax liabilities: Accrual to cash conversion  (86,023) (102,797) Deferred loan origination costs  (413,765) (344,571) Premises and equipment  (31,530) - Unrealized gain on available-for-sale investment securities  (152,046) (118,080) Other (47,736)  (986) Total deferred tax liabilities  (731,100)  (566,434) Net deferred tax assets (liabilities)  $ 2,704,410 $ 3,178,397 Included in the valuation allowance against the deferred tax assets is the 2009 loss on sale of FNMA  Preferred Stock. The loss on the preferred shares is accorded ordinary treatment for federal income  tax purposes, but treated as a capital loss for California tax purposes. For California, capital losses  are deductible only to the extent they offset capital gains within five years of the date that the loss is  realized for tax. Management believes that a valuation allowance is appropriate against the California  capital loss exposure in the amount of $141,979 at December 31, 2011 and 2010. This valuation  allowance is included as a component in the full valuation allowance against the Bank’s deferred tax  assets. At December 31, 2011, the Bank had Federal and State net operating loss carry-forwards (NOLs) of  $2,421,000 and $3,782,000, respectively. The Federal and State NOLs begin to expire in 2027 and  2019, respectively. The Bank files income tax returns in the U.S federal and California jurisdictions. There are currently  no pending U.S. federal or state income tax or non-U.S. income tax examinations by tax authorities. The Bank is subject to tax examinations by U.S. Federal and state taxing authorities for all tax returns  filed since its inception. As of December 31, 2011 and 2010, there were no unrecognized tax benefits or interest and penalties  accrued by the Bank. 38