NOTE I – INCOME TAXES:

Deferred taxes (or deferred charges) as of December 31, 2014, 2013 and 2012, included in other assets or other liabilities, were as follows (in thousands):


December 31,	2014			2013		2012
Deferred tax assets:
Allowance for loan losses	$	3,130		$	3,037	$	3,011
Employee benefit plans’ liabilities		4,490			4,326		4,135
Unrealized loss on available for sale securities, charged from equity		210			3,684
Earned retiree health benefits plan liability		1,638			1,638		1,673
General business and AMT credits		1,735
Tax net operating loss carryforward		651
Other		1,637			1,218		1,170
Valuation allowance		(8,140	)

Deferred tax assets		5,351			13,903		9,989

Deferred tax liabilities:
Unrealized gain on available for sale securities, charged to equity							1,556
Unearned retiree health benefits plan asset		362			579		948
Bank premises and equipment		4,760			5,075		5,366
Other		229			129		92

Deferred tax liabilities		5,351			5,783		7,962

Net deferred taxes	$			$	8,120	$	2,027

Income taxes consist of the following components (in thousands):


Years Ended December 31,	2014		2013		2012

Current	$	(137)	$	(1,717)	$	1,425
Deferred:
Federal		(3,277)		(484)		(1,517)
Change in valuation allowance		8,140

Total deferred		4,863		(484)		(1,517)

Totals	$	4,726	$	(2,201)	$	(92)

Income taxes amounted to less than the amounts computed by applying the U.S. Federal income tax rate of 34.0% for 2014, 2013 and 2012 to income (loss) before income taxes. The reasons for these differences are shown below (in thousands):


	2014						2013						2012

	Tax			Rate			Tax			Rate			Tax			Rate

Taxes computed at statutory rate	$	(1,794	)		(34	)	$	(931	)		(34	)	$	867			34
Increase (decrease) resulting from:
Tax-exempt interest income		(532	)		(10	)		(539	)		(20	)		(532	)		(21)
Income from BOLI		(200	)		(4	)		(170	)		(6	)		(195	)		(8)
Federal tax credits		(298	)		(6	)		(298	)		(11	)		(372	)		(15)
Other		(590	)		(10	)		(263	)		(9	)		140			6
Change in valuation allowance		8,140			154

Total income tax expense (benefit)	$	4,726			90		$	(2,201	)		(80	)	$	(92	)		(4)

A valuation allowance is recognized against deferred tax assets when, based on the consideration of all available positive and negative evidence using a more likely than not criteria, it is determined that all or a portion of these tax benefits may not be realized. This assessment requires consideration of all sources of taxable income available to realize the deferred tax asset including taxable income in prior carry-back years, future reversals of existing temporary differences, tax planning strategies and future taxable income exclusive of reversing temporary differences and carryforwards. The Company incurred losses on a cumulative basis for the three-year period ended December 31, 2014, which is considered to be significant negative evidence. The positive evidence considered in support was insufficient to overcome this negative evidence. As a result, the Company established a full valuation allowance for its net deferred tax asset in the amount of $8,140,000 as of December 31, 2014.

If not utilized, the Company’s federal net operating loss of $1,900,000 will expire in 2034.

The Company has reviewed its income tax positions and specifically considered the recognition and measurement requirements of the benefits recorded in its financial statements for tax positions taken or expected to be taken in its tax returns. The Company currently has no unrecognized tax benefits that, if recognized, would favorably affect the income tax rate in future periods.