NET DEFERRED TAX ASSETS AND INCOME TAXES

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

NET DEFERRED TAX ASSETS AND INCOME TAXES

NOTE 12 – NET DEFERRED TAX ASSET AND INCOME TAXES

Salisbury provides deferred taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is more likely than not. The components of the income tax provision were as follows:

Years ended December 31, (in thousands)		2016		2015		2014
Federal	$	1,344	$	2,186	$	1,057
State		288		432		226
Current provision		1,632		2,618		1,283
Federal		852		896		(553	)
State		105		49		(120	)
Deferred expense (benefit)		957		945		(673	)
Income tax provision	$	2,589	$	3,563	$	610

The following is a reconciliation of the expected federal statutory tax to the income tax provision:

Years ended December 31,	2016		2015		2014
Income tax at statutory federal tax rate	34.00	%	34.00	%	34.00	%
State tax, net of federal tax benefit	2.80		2.63		2.23
Tax exempt income and dividends received deduction	(9.07	)	(7.38	)	(30.22	)
Merger/acquisition related costs	—		—		7.77
Other	0.19		0.39		5.71
Effective income tax rates	27.92	%	29.64	%	19.49	%

The components of Salisbury's net deferred tax assets are as follows:

Years ended December 31, (in thousands)		2016			2015
Allowance for loan losses	$	2,023		$	1,877
Interest on non-performing loans		362			343
Accrued deferred compensation		268			153
Post-retirement benefits		17			17
Other real estate owned write-downs		184			—
Restricted stock awards		62			147
Mark-to-market purchase accounting adjustments		513			1,109
Write-down of securities		588			1,497
Other		64			22
Gross deferred tax assets		4,081			5,165
Deferred loan costs, net		(457	)		(436	)
Goodwill and core deposit intangible asset		(848	)		(853	)
Accelerated depreciation		(1,048	)		(1,130	)
Mortgage servicing rights		(116	)		(177	)
Net unrealized holding gain on available-for-sale securities		(245	)		(580	)
Gross deferred tax liabilities		(2,714	)		(3,176	)
Net deferred tax asset	$	1,367		$	1,989

Salisbury will only recognize a deferred tax asset when, based upon available evidence, realization is more likely than not.

In accordance with Connecticut legislation, in 2004, Salisbury formed a Passive Investment Company (“PIC”), SBT Mortgage Service Corporation. Salisbury does not expect to pay state income tax in the foreseeable future unless there is a change in Connecticut law.

Salisbury's policy is to provide for uncertain tax positions and the related interest and penalties (recorded as a component of income tax expense, if any) based upon management's assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. As of December 31, 2016 and 2015, there were no material uncertain tax positions related to federal and state tax matters. Salisbury is currently open to audit under the statute of limitations by the Internal Revenue Service and state taxing authorities for the years ended December 31, 2013 through December 31, 2016.