Income Taxes

The Corporation and the Bank file a consolidated federal income tax return. The provision for income taxes for the years ended December 31 is comprised of the following:



(Dollar amounts in thousands)	2016		2015
Current	$	1,045	$	(5	)
Deferred	203		1,146
	$	1,248	$	1,141

A reconciliation between the provision for income taxes and the amount computed by multiplying operating results before income taxes by the statutory federal income tax rate of 34% for the years ended December 31 is as follows:



(Dollar amounts in thousands)	2016					2015
				% Pre-tax					% Pre-tax
	Amount			Income		Amount			Income
Provision at statutory tax rate	$	1,779		34.0	%	$	1,800		34.0	%
Increase (decrease) resulting from:
Tax free interest, net of disallowance	(472		)	(9.0	)%	(542		)	(10.2	)%
Earnings on bank-owned life insurance	(113		)	(2.2	)%	(112		)	(2.1	)%
Other, net	54			1.0	%	(5		)	(0.1	)%
Provision	$	1,248		23.8	%	$	1,141		21.6	%


14.	Income Taxes (continued)

The tax effects of temporary differences between the financial reporting basis and income tax basis of assets and liabilities that are included in the net deferred tax asset as of December 31 relate to the following:



(Dollar amounts in thousands)	2016		2015

Deferred tax assets:

Funded status of pension plan	$	1,964	$	1,810
Allowance for loan losses	1,885		1,805
Deferred compensation	414		406
Net unrealized loss on securities	349		127
Stock compensation	160		155
Accrued incentive compensation	158		220
Securities impairment	149		149
Net operating loss carryforward	106		—
Purchase accounting adjustments	89		—
Nonaccrual loan interest income	73		68
Other	29		52
Gross deferred tax assets	5,376		4,792

Deferred tax liabilities:

Accrued pension liability	1,525		1,702
Depreciation	1,006		908
Deferred loan fees	431		284
Intangible assets	324		317
Other	60		30
Gross deferred tax liabilities	3,346		3,241
Net deferred tax asset	$	2,030	$	1,551

The Bank has approximately $313,000 of federal net operating loss carryforward that expires in 2036. The net operating loss was acquired from UASB and is subject to limitations under the Internal Revenue Code Section 382. The entire loss carryforward is expected to be used before expiration. In addition, the company has approximately $21,000 of alternative minimum tax (AMT)credit carryforward acquired from UASB. The AMT credit is not subject to expiration.

In accordance with relevant accounting guidance, the Corporation determined that it was not required to establish a valuation allowance for deferred tax assets since it is more likely than not that the deferred tax asset will be realized through carry-back to taxable income in prior years, future reversals of existing taxable temporary differences, tax strategies and, to a lesser extent, future taxable income. The Corporation’s net deferred tax asset or liability is recorded in the consolidated financial statements as a component of other assets or other liabilities.

At December 31, 2016 and December 31, 2015, the Corporation had no unrecognized tax benefits. The Corporation does not expect the total amount of unrecognized tax benefits to significantly increase within the next twelve months. The Corporation recognizes interest and penalties on unrecognized tax benefits in income taxes expense in its Consolidated Statements of Income.

The Corporation and the Bank are subject to U.S. federal income tax as well as a capital-based franchise tax in the Commonwealth of Pennsylvania. The Corporation and the Bank are no longer subject to examination by taxing authorities for years before 2013.