INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2013

Schedule of Components of Income Tax Expense

The components of income tax expense are stated below:

	For the years ended December 31,
(In thousands)	2013		2012
Income tax expense
Current	$	42	$	-
Deferred		-		-
Income tax expense	$	42	$	-

Statutory Federal Income Tax Rate Reconciliation

The difference between the applicable income tax expense and the amount computed by applying the statutory federal income tax rate of 34% in 2013 and 2012 is as follows:

	For the years ended December 31,
(In thousands)	2013			2012
Computed tax expense (benefit) at statutory rate	$	731		$	(5,313	)
Tax-exempt income		(22	)		(42	)
Department of Justice fine		-			680
Nondeductible expense		21			29
Bank owned life insurance		(183	)		(188	)
Adjustment to prior year items		1,933			-
(Decrease) increase in valuation allowance		(2,438	)		4,834
Applicable income tax expense	$	42		$	-

Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities consist of the following:

	As of December 31,
(In thousands)	2013			2012
Deferred tax assets
Allowance for loan and lease losses	$	4,648		$	5,863
Net operating loss carry forward		18,908			21,988
Asset valuation reserves		34			79
Escrow settlement reserves		561			-
Security writedowns		2,193			1,429
OREO writedowns		1,490			4,475
Investment in partnerships		1,805			34
Pension obligations		4,926			5,745
Unrealized losses on debt securities		2,171			-
Accrued stock-based compensation		143			804
Non-accrual interest		134			277
Capital loss carryovers		2,892			1,550
Charitable contribution carryovers		14			11
Other		77			139
Deferred tax assets before valuation allowance		39,996			42,394
Less valuation allowance		(37,159	)		(39,597	)
Total deferred tax assets		2,837			2,797
Deferred tax liabilities
Penalties on delinquent tax certificates		39			224
Unrealized gains on AFS debt investment securities		-			1,665
Unrealized gains on AFS equity securities		429			145
Prepaid deductions		190			285
Other		8			64
Total deferred tax liabilities		666			2,383
Net deferred tax assets, included in other assets	$	2,171		$	414