INCOME TAX (Tables)

12 Months Ended

Dec. 31, 2015

Composition of income tax expense (benefit)

The composition of income tax expense (benefit) for the years ended December 31 follows:

	2015		2014			2013
	(In thousands)
Current	$	200	$	(359	)	$	(277	)
Deferred		9,128		7,672			—
Disproportionate tax effect		—		—			1,444
Valuation allowance - change in estimate		35		(118	)		(56,018	)
Income tax expense (benefit)	$	9,363	$	7,195		$	(54,851	)

Reconciliation of income tax benefit computed by applying the statutory federal income tax rate

A reconciliation of income tax expense (benefit) to the amount computed by applying the statutory federal income tax rate of 35% in each year presented to the income before income tax for the years ended December 31 follows:

	2015			2014			2013
	(In thousands)
Statutory rate applied to income before income tax	$	10,283		$	8,826		$	7,930
Bank owned life insurance		(449	)		(480	)		(477	)
Tax-exempt income		(434	)		(522	)		(402	)
Unrecognized tax benefit		(135	)		(595	)		(186	)
Non-deductible meals, entertainment and memberships		43			53			55
Net change in valuation allowance		35			(118	)		(63,980	)
Disproportionate tax effect		—			—			1,444
U.S. Treasury warrant		—			—			359
Share-based compensation		—			—			8
Other, net		20			31			398
Income tax expense (benefit)	$	9,363		$	7,195		$	(54,851	)

Summary of deferred tax assets and deferred tax liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31 follow:

	2015			2014
	(In thousands)
Deferred tax assets
Loss carryforwards	$	25,516		$	32,933
Allowance for loan losses		7,901			9,099
Alternative minimum tax credit carry forward		3,427			3,037
Property and equipment		3,369			3,239
Purchase premiums, net		1,755			2,050
Share based payments		786			684
Valuation allowance on other real estate		592			879
Unrealized loss on trading securities		578			559
Deferred compensation		404			448
Other than temporary impairment charge on securities available for sale		382			436
Non accrual loan interest income		232			244
Reserve for unfunded lending commitments		228			189
Loss reimbursement on sold loans reserve		186			242
Unrealized loss on securities available for sale		128			—
Vehicle service contract counterparty contingency reserve		21			521
Gross deferred tax assets		45,505			54,560
Valuation allowance		(1,054	)		(1,019	)
Total net deferred tax assets		44,451			53,541

Deferred tax liabilities
Capitalized mortgage loan servicing rights		4,353		4,237
Deferred loan fees		256		260
Federal Home Loan Bank stock		45		196
Unrealized gain on securities available for sale		—		87
Other		162		129
Gross deferred tax liabilities		4,816		4,909
Net deferred tax assets	$	39,635	$	48,632

Schedule of federal net operating loss forwards

At December 31, 2015, we had federal net operating loss (“NOL”) carryforwards of approximately $73.4 million which, if not used against taxable income, will expire as follows:

	(In thousands)
2030	$	18,496
2031		17,170
2032		37,739
Total	$	73,405

Schedule of changes in unrecognized tax benefits

Changes in unrecognized tax benefits for the years ended December 31 follow:

	2015			2014			2013
	(In thousands)
Balance at beginning of year	$	1,091		$	1,672		$	1,871
Additions based on tax positions related to the current year		20			18			11
Reductions due to the statute of limitations		(135	)		(595	)		(186	)
Reductions due to settlements		—			(4	)		(24	)
Balance at end of year	$	976		$	1,091		$	1,672