INCOME TAX (Tables)

12 Months Ended

Dec. 31, 2014

Composition of income tax expense (benefit)

The composition of income tax expense (benefit) for the years ended December 31 follows:

	2014			2013			2012
	(In thousands)
Current	$	(359	)	$	(277	)	$	-
Deferred		7,672			-			-
Disproportionate tax effect		-			1,444			-
Valuation allowance - change in estimate		(118	)		(56,018	)		-
Income tax expense (benefit)	$	7,195		$	(54,851	)	$	-

Reconciliation of income tax benefit computed by applying the statutory federal income tax rate

A reconciliation of income tax benefit to the amount computed by applying the statutory federal income tax rate of 35% in each year presented to the income before income tax for the years ended December 31 follows:

	2014			2013			2012
	(In thousands)
Statutory rate applied to income before income tax	$	8,826		$	7,930		$	9,169
Unrecognized tax benefit		(595	)		(186	)		-
Tax-exempt income		(522	)		(402	)		(453	)
Bank owned life insurance		(480	)		(477	)		(568	)
Net change in valuation allowance		(118	)		(63,980	)		(8,730	)
Non-deductible meals, entertainment and memberships		53			55			55
Disproportionate tax effect		-			1,444			-
U.S. Treasury warrant		-			359			100
Share-based compensation		-			8			258
Other, net		31			398			169
Income tax expense (benefit)	$	7,195		$	(54,851	)	$	-

Summary of deferred tax assets and deferred tax liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31 follow:

	2014			2013
	(In thousands)
Deferred tax assets
Loss carryforwards	$	32,933		$	38,027
Allowance for loan losses		9,099			11,317
Fixed assets		3,239			3,081
Alternative minimum tax credit carry forward		3,037			2,672
Purchase premiums, net		2,050			2,280
Valuation allowance on other real estate owned		879			1,431
Share based payments		684			402
Unrealized loss on trading securities		559			456
Vehicle service contract counterparty contingency reserve		521			523
Deferred compensation		448			523
Other than temporary impairment charge on securities available for sale		436			466
Non accrual loan interest income		244			325
Loss reimbursement on sold loans reserve		242			492
Reserve for unfunded lending commitments		189			178
Unrealized loss on derivative financial instruments		-			133
Unrealized loss on securities available for sale		-			1,723
Other		-			40
Gross deferred tax assets		54,560			64,069
Valuation allowance		(1,019	)		(1,137	)
Total net deferred tax assets		53,541			62,932
Deferred tax liabilities
Mortgage servicing rights		4,237			4,799
Deferred loan fees		260			265
Federal Home Loan Bank stock		196			318
Unrealized gain on securities available for sale		87			-
Other		129			-
Gross deferred tax liabilities		4,909			5,382
Net deferred tax assets	$	48,632		$	57,550

Schedule of federal net operating loss forwards

At December 31, 2014, we had federal net operating loss (“NOL”) carryforwards of approximately $92.4 million which, if not used against taxable income, will expire as follows:

	(In thousands)
2029	$	11,285
2030		26,254
2031		17,170
2032		37,739
Total	$	92,448

Schedule of changes in unrecognized tax benefits

Changes in unrecognized tax benefits for the years ended December 31 follow:

	2014			2013			2012
	(In thousands)
Balance at beginning of year	$	1,672		$	1,871		$	2,139
Additions based on tax positions related to the current year		18			11			15
Reductions due to the statute of limitations		(595	)		(186	)		(56	)
Reductions due to settlements		(4	)		(24	)		(227	)
Balance at end of year	$	1,091		$	1,672		$	1,871