9. INCOME TAXES

The following table presents the expense for income taxes in the consolidated statements of income which is comprised of the following (in thousands):

		2016			2015			2014
Current:	Federal	$	4,989		$	4,178		$	5,208
	State and local		515			694			223
			5,504			4,872			5,431
Deferred:	Federal		2,343			1,139			(885	)
	State and local		28			429			(747	)
			2,371			1,568			(1,632	)
Valuation allowance			(253	)		(554	)		(79	)
Total		$	7,622		$	5,886		$	3,720

The total tax expense was different from the amounts computed by applying the federal income tax rate because of the following:

	2016			2015			2014
Federal income tax expense at statutory rates		35	%		35	%		35	%
Surtax exemption		(1	)		(1	)		(1	)
Tax-exempt income		(8	)		(10	)		(14	)
State and local income taxes, net of federal benefit		2			2			1
Deferred tax asset adjustment and change in rate		-			(1	)		(2	)
Other		-			-			1
Total		28	%		25	%		20	%

The effects of temporary differences between tax and financial accounting that create significant deferred tax assets and liabilities and the recognition of income and expense for purposes of tax and financial reporting are presented below (in thousands):

	2016			2015			2014
Deferred tax assets:
Allowance for loan losses	$	8,244		$	8,392		$	7,576
Deferred compensation		1,560			1,624			1,652
Stock-based compensation		763			640			459
Realized losses on securities reclassed from available for sale to held to maturity		49			930			1,180
Unfunded pension obligation		3,277			2,529			2,496
Alternative minimum tax credit		-			2,427			3,925
Net operating loss carryforward		699			614			1,169
Other		1,170			1,104			992
Total deferred tax assets		15,762			18,260			19,449
Deferred tax liabilities:
Unrealized gains on securities available for sale		(71	)		(957	)		(1,724	)
Other		(608	)		(844	)		(842	)
Total deferred tax liabilities		(679	)		(1,801	)		(2,566	)
Valuation allowance		(699	)		(614	)		(1,169	)
Net deferred tax assets	$	14,384		$	15,845		$	15,714

The deferred tax assets and liabilities are netted and presented in a single amount which is included in deferred taxes in the accompanying consolidated statements of condition. The realization of deferred tax assets (“DTAs”) (net of a recorded valuation allowance) is largely dependent upon future taxable income, future reversals of existing taxable temporary differences and the ability to carry back losses to available tax years. In assessing the need for a valuation allowance, the Company considers positive and negative evidence, including taxable income in carryback years, scheduled reversals of deferred tax liabilities, expected future taxable income and tax planning strategies. At December 31, 2016, the Company had net operating loss carryforwards of approximately $14.4 million for New York State (“NYS”) income tax purposes, which may be applied against future taxable income. The Company has a full valuation allowance of $699 thousand, tax effected, on the NYS net operating loss carryforward due to the Company’s significant tax-exempt investment income. The valuation allowance may be reversed to income in future periods to the extent that the related DTAs are realized or when the Company returns to consistent, taxable earnings in NYS. The NYS unused net operating loss carryforwards are expected to expire in varying amounts through the year 2032.

The Company had no unrecognized tax benefits at December 31, 2016 and 2015 as compared to $34 thousand at December 31, 2014. The Company files income tax returns in the U.S. federal jurisdiction and in New York State. Federal returns are subject to audits by tax authorities. The Company’s Federal tax returns were audited for the tax years 2010 through 2013; there was no change in income taxes as a result of these audits. It is not anticipated that the unrecognized tax benefits will significantly change over the next 12 months.