8) Income Taxes

Some items of income and expense are recognized in different years for tax purposes than when applying generally accepted accounting principles, leading to timing differences between the Company's actual current tax liability and the amount accrued for this liability based on book income. These temporary differences comprise the "deferred" portion of the Company's tax expense or benefit, which is accumulated on the Company's books as a deferred tax asset or deferred tax liability until such time as they reverse.

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. In accordance with Accounting Standards Codification (ASC) 740-10 Accounting for Uncertainty in Income Taxes, the Company estimated the need for a reserve for income taxes of $2,000, net of Federal benefit, for uncertain state income tax positions of Bay View Funding as of September 30, 2016. The Company does not expect this amount to significantly increase or decrease in the next twelve months.

The Company had net deferred tax assets of $20,320,000, and $22,218,000, at September 30, 2016, and December 31, 2015, respectively. After consideration of the matters in the preceding paragraph, the Company determined that it is more likely than not that the net deferred tax asset at September 30, 2016 and December 31, 2015 will be fully realized in future years.

The following table reflects the carry amounts of the low income housing investments included in accrued interest receivable and other assets, and the future commitments included in accrued interest payable and other liabilities as of September 30, 2016 and December 31, 2015:

	September 30, 2016		December 31, 2015
	(Dollars in thousands)
Low income housing investments	$	3,998	$	4,304
Future commitments	$	380	$	1,271

The Company expects $283,000 of the future commitments to be paid in 2016, $14,000 in 2017, and $83,000 in 2018 through 2023.

For tax purposes, the Company had low income housing tax credits of $111,000 and $180,000 for the three months ended September 30, 2016 and September 30, 2015, respectively, and low income housing investment losses of $118,000 and $217,000, respectively. For tax purposes, the Company had low income housing tax credits of $333,000 and $540,000 for the nine months ended September 30, 2016 and September 30, 2015, respectively, and low income housing investment losses of $353,000 and $651,000, respectively. The Company recognized low income housing investment expense as a component of income tax expense.