7) 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.

The Company had net deferred tax assets of $22,400,000, and $25,058,000, at September 30, 2017, and December 31, 2016, 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, 2017 and December 31, 2016 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 for the periods indicated:


	September 30,		December 31,
	2017		2016
	(Dollars in thousands)
Low income housing investments	$	3,526	$	3,880
Future commitments	$	365	$	365

The Company expects future commitments of $79,000 to be paid in 2017, $14,000 in 2018, and $272,000 in 2019 through 2023.

For tax purposes, the Company had low income housing tax credits of $110,000 and $111,000 for the three months ended September 30, 2017 and September 30, 2016, respectively, and low income housing investment losses of $115,000 and $118,000, respectively. For tax purposes, the Company had low income housing tax credits of $329,000 and $333,000 for the nine months ended September 30, 2017 and September 30, 2016, respectively, and low income housing investment losses of $345,000 and $353,000, respectively. The Company recognized low income housing investment expense as a component of income tax expense.