Note 5 – Other Assets

The Company had the following other assets at September 30, 2015 and December 31, 2014.

(Dollars in thousands)	September 30, 2015		December 31, 2014
Nonmarketable investment securities	$	1,621	$	1,586
Accrued interest receivable		2,617		2,663
Deferred income taxes		12,772		15,744
Prepaid expenses		1,334		750
Other assets		6,699		6,419
Total	$	25,043	$	27,162

The following table provides information on significant components of the Company’s deferred tax assets and liabilities as of September 30, 2015 and December 31, 2014.

	September 30,		December 31,
(Dollars in thousands)	2015		2014
Deferred tax assets:
Allowance for credit losses	$	3,230	$	3,072
Reserve for off-balance sheet commitments		121		121
Net operating loss carry forward		10,426		13,265
Write-downs of other real estate owned		320		355
Deferred income		1,164		1,132
Accrued expenses		926		918
Other		198		80
Total deferred tax assets		16,385		18,943
Deferred tax liabilities:
Depreciation		293		372
Purchase accounting adjustments		2,069		1,751
Deferred capital gain on branch sale		415		425
Unrealized gains on available-for-sale securities		546		214
Other		290		437
Total deferred tax liabilities		3,613		3,199
Net deferred tax assets	$	12,772	$	15,744

The Company’s deferred tax assets primarily consist of net operating loss carryovers that will be used to offset taxable income in future periods through their statutory period of 20 years for federal tax purposes. No valuation allowance on these deferred tax assets was recorded at September 30, 2015 and December 31, 2014 as management believes it is more likely than not that all deferred tax assets will be realized based on the following positive material factors: 1) The Company was profitable for all four quarters of 2014 and the first three quarters of 2015 on a GAAP basis. The net operating loss was originally created in the third quarter of 2013 and was solely attributable to Talbot Bank’s sale of loans and other real estate owned (the “Asset Sale”), which is considered non-recurring. 2) The Company had pre-tax income of $8.1 million for the year ended December 31, 2014, providing further evidence that the Asset Sale was producing positive results and confirming the expectation of utilizing the deferred tax assets. 3) As a contingent opportunity, the Company has had discussions with certain investors about entering into a sales leaseback transaction for some of its branch locations which would generate a material taxable gain. The decision to act on this has been deferred; however, it would become a very viable option as a tax planning strategy if there was a risk that the net operating loss carryovers would expire before they were fully utilized. Alternatively, the Company has reviewed negative factors which would influence the conclusion of realizing the deferred tax assets. These factors include the following: 1) The Company could be subject to Section 382 of the Internal Revenue Code (“IRC”), which could further limit the realization of the net operating loss-related deferred tax asset (“NOL-DTA”). 2) Although the local economy of the market in which the Company operates has been showing continued signs of improvement over the past three years, if this trend flattens or reverses, there is a potential that this potential negative evidence could outweigh the prevailing positive factors.

Based on the aforementioned considerations, the Company has concluded that the predominance of observable positive evidence outweighs the future potential of negative evidence and therefore it is more likely than not that the Company will be able to realize in the future all of the net deferred tax assets.