NOTE 11 — INCOME TAXES

The components of the federal income tax provision (credit) for the years ended December 31 are as follows (dollars in thousands):


	2016		2015		2014

Current tax expense	$	485	$	—	$	—
Change in valuation allowance				(760)		—
Deferred tax expense		1,798		3,093		1,129

Provision for income taxes	$	2,283	$	2,333	$	1,129

A summary of the source of differences between income taxes at the federal statutory rate and the provision (credit) for income taxes for the years ended December 31 is as follows (dollars in thousands):


	2016		2015		2014

Tax expense at statutory rate	$	2,301	$	2,695	$	962
Increase (decrease) in taxes resulting from:
Tax-exempt interest		(96)		(60)		(25)
Change in valuation allowance		—		(760)		—
Expiration of deferred tax assets		—		429		—
Nondeductible transaction expenses		95		—		176
Other		(17)		29		16

Provision for income taxes, as reported	$	2,283	$	2,333	$	1,129

Deferred income taxes are provided for the temporary differences between the financial reporting and tax bases of the Corporation’s assets and liabilities. The major components of net deferred tax assets at December 31 are as follows (dollars in thousands):


	2016		2015
Deferred tax assets:
NOL carryforward	$	3,080	$	4,331
Allowance for loan losses		1,413		1,705
Alternative Minimum Tax Credit		1,944		1,999
OREO Tax basis > book basis		142		162
Tax credit carryovers		235		338
Deferred compensation		443		517
Pension liability		387		384
Stock compensation		116		141
Unrealized gain (loss) on securities		52		(153)
Purchase accounting adjustments		1,791		955
Other		805		141

Total deferred tax assets		10,408		10,520

Valuation allowance	$	—	$	—

Deferred tax liabilities:
Core deposit premium		(739)		(366)
FHLB stock dividend		(91)		(100)
Depreciation		(208)		(113)
Mortgage servicing rights		(583)		(667)
Other		(27)		(61)
Total deferred tax liabilities		(1,648)		(1,307)

Net deferred tax asset	$	8,760	$	9,213

The Corporation has reported deferred tax assets of $8.760 million at December 31, 2016. A valuation allowance is provided against deferred tax assets when it is more likely than not that some or all of the deferred tax asset will not be realized. The Corporation, as of December 31, 2016 had a net operating loss and tax credit carryforwards for tax purposes of approximately $9.1 million, and $2.2 million, respectively. The Corporation evaluated the future benefits from these carryforwards as of December 31, 2016 and determined that it was “more likely than not” that they would be utilized prior to expiration. The net operating loss carryforwards expire twenty years from the date they originated. These carryforwards, if not utilized, will begin to expire in the year 2023. A portion of the NOL and credit carryforwards are subject to the limitations for utilization as set forth in Section 382 of the Internal Revenue Code. The annual limitation is $1.404 million for the NOL and the equivalent value of tax credits, which is approximately $.476 million. These limitations for use were established in conjunction with the recapitalization of the Corporation in December 2004. The Corporation will continue to evaluate the future benefits from these carryforwards in order to determine if any adjustment to the deferred tax asset is warranted.