(10) Income Taxes

Income tax (benefit) consisted of the following for the year ended December 31, as follows:

	2013			2012		2011

	(Dollars in thousands)
Currently payable tax:
Federal	$	3,763		$	2,944	$	89
State		63			51		140


Total currently payable		3,826			2,995		229
Deferred tax (benefit):
Federal		(130	)		292		2,068
State		1,258			1,007		569
Deferred tax valuation allowance		—			—		(3,700	)


Total deferred tax (benefit)		1,128			1,299		(1,063	)


Income tax (benefit)	$	4,954		$	4,294	$	(834	)

The effective tax rate differs from the federal statutory rate for the years ended December 31, as follows:



Statutory Federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	5.3	%	4.7	%	4.4	%
Split dollar term insurance	0.2	%	0.0	%	0.0	%
Change in valuation allowance	0.0	%	0.0	%	-35.1	%
Low income housing credits	-4.4	%	-6.0	%	-8.0	%
Increase in cash surrender value of life insurance	-3.5	%	-4.2	%	-5.7	%
Non-taxable interest income	-2.9	%	-0.3	%	0.0	%
Other, net	0.3	%	1.0	%	1.5	%


Effective tax rate	30.0	%	30.2	%	-7.9	%

Deferred tax assets and liabilities that result from the tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes at December 31, are as follows:

	2013			2012

	(Dollars in thousands)
Deferred tax assets:
Defined postretirement benefit obligation	$	8,707		$	8,956
Allowance for loan losses		8,058			8,000
Tax credit carryforwards		3,958			5,296
Stock compensation		1,697			1,517
California net operating loss carryforwards		1,138			2,281
Accrued expenses		1,029			794
Securities available-for-sale		668			—
Fixed assets		613			678
Nonaccrual interest		134			99
Split-dollar life insurance benefit plan		108			103
Other		451			148


Total deferred tax assets		26,561			27,872
Deferred tax liabilities:
Securities available-for-sale		—			(5,033	)
FHLB stock		(263	)		(263	)
Prepaid expenses		(481	)		(359	)
Intangible assets		(642	)		(841	)
I/O strips		(691	)		(1,036	)
Loan fees		(1,025	)		(908	)
Other		(133	)		(168	)


Total deferred tax liabilities		(3,235	)		(8,608	)


Net deferred tax assets	$	23,326		$	19,264

Tax credit carryforwards as of December 31, 2013 consist of the following:

	2013

	(Dollars in thousands)
Low income housing credits	$	3,041	(begin to expire in 2029)
Alternative Minimum Tax credits		870	(no expiration date)
State tax credits, net of federal tax effects		45	(no expiration date)
New Hire Retention Credit		2	(expires in 2031)


Total tax credit carryforwards	$	3,958

If the Company were to generate a federal net operating loss, it would have the ability to carryback its net operating loss to recover some federal income taxes paid in prior years. Under current California law, if the Company were to generate a state net operating loss, it would have the ability to carryback 50% of the net operating loss to recover some state income taxes paid in prior years.

At year-end 2013, the Company has a California net operating loss carryforward of approximately $16,148,000 that will begin to expire in 2031, if not utilized to reduce future taxable income.

Under generally accepted accounting principles, a valuation allowance is required if it is "more likely than not" that a deferred tax asset will not be realized. The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment concerning management's evaluation of both positive and negative evidence, including forecasts of future income, cumulative losses, applicable tax planning strategies, and assessments of current and future economic and business conditions. The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months.

At December 31, 2013, and December 31, 2012, the Company had net deferred tax assets of $23,326,000 and $19,264,000, respectively. At December 31, 2013, the Company determined that a valuation allowance for deferred tax assets was not necessary.

The Company and its subsidiaries are subject to U.S. Federal income tax as well as income tax of the State of California. The Company is no longer subject to examination by federal and state taxing authorities for years before 2010 and 2009, respectively.