Income Taxes

At December 31, 2016 and 2015, the Company had $1.8 million and $878,000 in total taxes receivable, respectively, included in other assets. The Company realized $3.5 million , $2.4 million, and $1.3 million in tax credits related to its investments in low income housing tax credit partnerships for 2016, 2015, and 2014 respectively. Additionally, in 2014, the Company purchased and utilized $59,000 in Alaska film tax credits from the State of Alaska.

Components of the provision for income taxes are as follows:



(In Thousands)	Current Tax Expense (Benefit)		Deferred Expense(Benefit)			Total Expense
2016:
Federal		$2,874		($281	)		$2,593
State	674		(83		)	591
Amortization of investment in low income housing tax credit partnerships	2,868		—			2,868
Total		$6,416		($364	)		$6,052
2015:
Federal		$4,752		$127			$4,879
State	1,200		21			1,221
Amortization of investment in low income housing tax credit partnerships	2,684		—			2,684
Total		$8,636		$148			$8,784
2014:
Federal		$6,589		($1,117	)		$5,472
State	1,558		(194		)	1,364
Amortization of investment in low income housing tax credit partnerships	1,337		—			1,337
Total		$9,484		($1,311	)		$8,173

The actual expense for 2016, 2015, and 2014, differs from the “expected” tax expense (computed by applying the U.S. Federal Statutory Tax Rate of 35% for the year ended December 31, 2016, 2015, and 2014) as follows:



(In Thousands)	2016			2015			2014
Computed “expected” income tax expense		$7,365			$8,552			$8,646
State income taxes, net	384			794			886
Non-deductible merger expenses	—			—			130
Tax-exempt interest on investment securities	(566		)	(507		)	(415		)
Tax-exempt gain on purchase of mortgage affiliate	—			—			(1,050		)
Amortization of investment in low income housing tax credit partnerships	2,868			2,684			1,337
Low income housing credits	(3,540		)	(2,446		)	(1,298		)
Other	(459		)	(293		)	(63		)
Total		$6,052			$8,784			$8,173

The components of the net deferred tax asset are as follows:



(In Thousands)	2016			2015			2014
Deferred Tax Asset:
Allowance for loan losses		$7,717			$7,082			$5,900
Loan fees, net of costs	1,823			1,896			1,871
Depreciation and amortization	31			(64		)	(60		)
Other real estate owned	123			46			50
Deferred compensation	2,112			2,005			1,691
Net operating loss carryforwards	—			73			589
Equity compensation	544			578			502
Loan discount	326			476			1,003
Fair market value adjustment on certificates of deposit	247			283			321
Unrealized loss on available-for-sale investment securities	195			235			—
Other	1,455			1,380			1,636
Total Deferred Tax Asset		$14,573			$13,990			$13,503

Deferred Tax Liability:
Unrealized gain on available-for-sale investment securities		$—			$—			($173	)
Intangible amortization	(2,804		)	(2,494		)	(2,206		)
Mortgage servicing rights	(415		)	(415		)	—
FHLB stock repurchase and dividends	(686		)	(686		)	(306		)
Other	(404		)	(456		)	(731		)
Total Deferred Tax Liability		($4,309	)		($4,051	)		($3,416	)
Net Deferred Tax Asset		$10,264			$9,939			$10,087

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. The primary source of recovery of the deferred tax asset will be future taxable income. Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax asset. The deferred tax asset is included in other assets.

The Company acquired Alaska Pacific on April 1, 2014. Alaska Pacific was founded in 1935, and was originally operated as a mutual savings and loan association until 1999 when a mutual to stock conversion was completed. As a taxpayer with a thrift charter, Alaska Pacific was able to use the percentage of taxable income method of accounting for tax basis bad debts prior to August of 1996. In August 1996, the Small Business Job Protection Act of 1996 (“the Act”) was signed into law. Under the Act, the percentage of taxable income method of accounting for tax basis bad debts is no longer available effective for the years ending after December 31, 1995. As a result, Alaska Pacific was required to use the experience method of accounting for tax basis bad debts for 1998 and later years. In addition, the Act requires the recapture of post-1987 (the base year) additions to the tax bad debt reserves made pursuant to the percentage of taxable income method.

The Company merger with Alaska Pacific on April 1, 2014 qualified as a tax-free reorganization under Internal Revenue Cost ("Code") Section 368(a)(1)(A). As such, the tax basis of all assets and liabilities that the Company acquired in the merger retain their original tax basis. The Company was not subject to this recapture in 2015 or 2014, as the tax bad debt reserves acquired from Alaska Pacific do not exceed the base year reserve.

As of December 31, 2016, the Company had no unrecognized tax benefits. There were no amounts related to interest and penalties recognized for the years ended December 31, 2016, 2015, and 2014. The tax years subject to examination by federal and state taxing authorities are the years ending December 31, 2016, 2015, 2014 and 2013.