Annual report pursuant to Section 13 and 15(d)

FEDERAL INCOME TAXES

v2.4.1.9
FEDERAL INCOME TAXES
 12 Months Ended
Dec. 31, 2014
FEDERAL INCOME TAXES [Abstract]  
FEDERAL INCOME TAXES
NOTE 14 - FEDERAL INCOME TAXES

Income tax expense (benefit) was as follows (dollars in thousands):
 
 
2014
    
2013
    
2012
  
Current
  
$
1,724
    
$
120
    
$
275
  
Deferred
    
2,849
      
4,150
      
---
  
Valuation allowance - change in estimate
    
---
      
---
      
(18,858
)
   
$
4,573
    
$
4,270
    
$
(18,583
)
 
The difference between the financial statement tax expense and amount computed by applying the statutory federal tax rate to pretax income was reconciled as follows (dollars in thousands):

   
2014
    
2013
    
2012
  
Statutory rate
    
35
%
    
35
%
    
35
%
Statutory rate applied to income before taxes
  
$
5,266
    
$
4,837
    
$
5,917
  
Add (deduct)
                        
Change in valuation allowance
    
---
      
---
      
(24,026
)
Tax-exempt interest income
    
(391
)
    
(244
)
    
(103
)
Bank-owned life insurance
    
(237
)
    
(250
)
    
(297
)
Other, net
    
(65
)
    
(73
)
    
(74
)
   
$
4,573
    
$
4,270
    
$
(18,583
)

The realization of deferred tax assets (net of a recorded valuation allowance) is largely dependent upon future taxable income, future reversals of existing taxable temporary differences and the ability to carryback losses to available tax years. In assessing the need for a valuation allowance, we consider positive and negative evidence, including taxable income in carry-back years, scheduled reversals of deferred tax liabilities, expected future taxable income and tax planning strategies.  The Company’s analysis at December 31, 2012 concluded that it was “more likely than not” that the Company would continue to produce earnings and that the positive evidence outweighed the negative evidence regarding its ability to utilize our deferred tax assets.  As such, the valuation allowance that had been established on deferred tax assets in 2009 was reversed at December 31, 2012.  No valuation allowance was necessary at December 31, 2014, 2013 or 2012.

The net deferred tax asset recorded included the following amounts of deferred tax assets and liabilities (dollars in thousands):

   
2014
    
2013
  
Deferred tax assets
        
Allowance for loan losses
  
$
6,637
    
$
7,279
  
Nonaccrual loan interest
    
935
      
782
  
Valuation allowance on other real estate owned
    
5,190
      
5,847
  
Net operating loss carryforward
    
---
      
1,743
  
Unrealized loss on securities available for sale
    
---
      
1,053
  
Other
    
1,896
      
1,808
  
Gross deferred tax assets
    
14,658
      
18,512
  
Valuation allowance
    
---
      
---
  
Total net deferred tax assets
    
14,658
      
18,512
  
                 
Deferred tax liabilities
                
Depreciation
    
(1,908
)
    
(1,620
)
Prepaid expenses
    
(21
)
    
(308
)
Unrealized gain on securities available for sale
    
(33
)
    
---
  
Other
    
(431
)
    
(384
)
Gross deferred tax liabilities
    
(2,393
)
    
(2,312
)
Net deferred tax asset
  
$
12,265
    
$
16,200
  

There were no unrecognized tax benefits at December 31, 2014 or 2013 and the Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months. The Company is no longer subject to examination by the Internal Revenue Service for years before 2011.