Quarterly report pursuant to Section 13 or 15(d)

FEDERAL INCOME TAXES

v2.4.1.9
FEDERAL INCOME TAXES
 3 Months Ended
Mar. 31, 2015
FEDERAL INCOME TAXES [Abstract]  
FEDERAL INCOME TAXES
NOTE 9 – FEDERAL INCOME TAXES
 
Income tax expense was as follows (dollars in thousands):
 
   
Three Months
Ended
March 31,
2015
    
Three Months
Ended
March 31,
2014
  
Current
  
$
653
    
$
23
  
Deferred
    
592
      
1,154
  
   
$
1,245
    
$
1,177
  

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):

 
Three Months
Ended
March 31,
2015
Three Months
Ended
March 31,
2014
Statutory rate
    
35
%
    
35
%
Statutory rate applied to income before taxes
  
$
1,430
    
$
1,336
  
Add (deduct)
                
Tax-exempt interest income
    
(117
)
    
(85
)
Bank-owned life insurance
    
(57
)
    
(54
)
Other, net
    
(11
)
    
(20
)
   
$
1,245
    
$
1,177
  

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.  No valuation allowance was necessary at March 31, 2015 or December 31, 2014.

The net deferred tax asset recorded included the following amounts of deferred tax assets and liabilities (dollars in thousands):
  
   
March 31,
2015
    
December 31,
2014
  
Deferred tax assets
        
Allowance for loan losses
  
$
6,538
    
$
6,637
  
Nonaccrual loan interest
    
984
      
935
  
Valuation allowance on other real estate owned
    
5,215
      
5,190
  
Unrealized loss on securities available for sale
    
---
      
---
  
Other
    
1,293
      
1,896
  
Gross deferred tax assets
    
14,030
      
14,658
  
Valuation allowance
    
---
      
---
  
Total net deferred tax assets
    
14,030
      
14,658
  
                 
Deferred tax liabilities
                
Depreciation
    
(1,871
)
    
(1,908
)
Prepaid expenses
    
(21
)
    
(21
)
Unrealized gain on securities available for sale
    
(452
)
    
(33
)
Other
    
(432
)
    
(431
)
Gross deferred tax liabilities
    
(2,776
)
    
(2,393
)
Net deferred tax asset
  
$
11,254
    
$
12,265
  
 
There were no unrecognized tax benefits at March 31, 2015 or December 31, 2014 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 2012.