Income Taxes

The reported income tax expense and effective tax rate in the Consolidated Statements of Income differs from the amounts computed by applying the statutory corporate tax rate as follows for the years ended December 31:



	2015					2014					2013
(Dollars in thousands)	Amount			Rate		Amount			Rate		Amount			Rate
Income tax computed at statutory federal tax rate	$	5,051		34.1	%	$	8,462		35.0	%	$	10,179		35.0	%
Differences in rate resulting from:
Tax-exempt interest income	(1,109		)	(7.5	)%	(726		)	(3.0	)%	(645		)	(2.2	)%
Investments in tax credit funds	(123		)	(0.8	)%	(481		)	(2.0	)%	(314		)	(1.1	)%
Bank owned life insurance	(204		)	(1.4	)%	(37		)	—	%	2,183			7.5	%
Other, net	260			1.8	%	276			1.0	%	107			0.4	%
Income tax expense	$	3,875		26.2	%	$	7,494		31.0	%	$	11,510		39.6	%

Peoples' reported income tax expense consisted of the following for the years ended December 31:



(Dollars in thousands)	2015			2014		2013
Current income tax expense	$	5,457		$	3,659	$	6,883
Deferred income tax (benefit) expense	(1,582		)	3,835		4,627
Income tax expense	$	3,875		$	7,494	$	11,510

The significant components of Peoples' deferred tax assets and liabilities consisted of the following at December 31:



(Dollars in thousands)	2015		2014
Deferred tax assets:
Allowance for loan losses	$	12,144	$	10,493
Bank premises and equipment	1,060		—
Available-for-sale securities	—		—
Investments	1,842		1,956
Accrued employee benefits	2,748		2,662
Other	3,803		1,146
Gross deferred tax assets	$	21,597	$	16,257
Valuation allowance	605		—
Total deferred tax assets	$	20,992	$	16,257
Deferred tax liabilities:
Purchase accounting adjustments	11,342		6,316
Available-for-sale securities	1,544		1,368
Bank premises and equipment	—		2,470
Deferred loan income	2,260		1,924
Other	664		684
Total deferred tax liabilities	$	15,810	$	12,762
Net deferred tax asset	$	5,182	$	3,495

The tax loss carryforward, related to the NB&T acquisition at December 31, 2015 will be recognized in accordance with 26 U.S. Code §382 limitation of net operating loss carry forward guidance. As of December 31, 2015, the Company had a net operating loss carryforward of approximately $5.8 million for tax purposes, which will be available to offset future taxable income. If not used, this carryforward will expire in 2035.

A $0.6 million valuation allowance related to a partnership investment was recorded for deferred tax assets at December 31, 2015, as it is more likely than not that the $1.7 million of gross deferred tax assets may not be realized in future periods. The related federal income tax expense on securities transactions approximated $255,000 in 2015, $139,000 in 2014 and $171,000 in 2013.

Income tax benefits are recognized in the Consolidated Financial Statements for a tax position only if it is considered "more likely than not" of being sustained on audit, based solely on the technical merits of the income tax position. If the recognition criteria are met, the amount of income tax benefits to be recognized are measured based on the largest income tax benefit that is more than 50 percent likely to be realized on ultimate resolution of the tax position. The following table provides a reconciliation of uncertain tax positions at December 31:



(Dollars in thousands)	2015			2014
Uncertain tax positions, beginning of year	$	240		$	30
Gross increase based on tax positions related to current year	182			178
Gross increase for tax position taken during prior years	—			33
Gross decrease for tax positions taken during prior years	(2		)	—
Gross decrease due to the statute of limitations	(3		)	(1		)
Uncertain tax positions, end of year	$	417		$	240

Peoples' income tax returns are subject to review and examination by federal and state taxing authorities. Peoples is currently open to audit under the applicable statutes of limitations by the Internal Revenue Service for the years ended December 31, 2012 through 2014. The years open to examination by state taxing authorities vary by jurisdiction.