Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Schedule of Components of Income Tax Expense


	For the years ended December 31,
(In thousands)	2016		2015
Income tax (benefit) expense
Current-federal	$	171	$	21
Current-state		2		16
Deferred		(1,969)		(5,176)
Income tax benefit	$	(1,796)	$	(5,139)

The income tax benefit for 2016 and 2015 is largely due to the release of a portion of the valuation allowance against the net deferred tax assets (“DTA”)

Statutory Federal Income Tax Rate Reconciliation


	For the years ended December 31,
(In thousands)	2016		2015
Computed tax expense at statutory rate	$	3,116	$	2,169
Non-controlling interest		(263)		(205)
Alternative minimum tax ("AMT") expense		133		21
Stock options expense		43		20
Nondeductible expense		92		146
Bank owned life insurance		(489)		(169)
Federal net operating loss-KNBT*		—		1,368
State taxes (benefit) expense (net of federal benefit)		(49)		8
Adjustment to prior year items		(82)		67
Decrease in valuation allowance		(4,297)		(8,564)
Income tax benefit	$	(1,796)	$	(5,139)

*KNBT: Knoblauch State Bank

Deferred Tax Assets and Liabilities


	As of December 31,
(In thousands)	2016		2015
Deferred tax assets
Allowance for loan and lease losses and unfunded loan commitments	$	2,843	$	2,699
Net operating loss carryforwards		20,712		22,546
Security writedowns		1,085		1,020
OREO writedowns		94		139
Investment in partnerships		1,920		1,698
Pension obligation		3,782		3,858
Pension obligation-AOCI		1,407		1,250
Unrealized losses on debt securities		389		165
Share-based compensation cost		57		83
Non-accrual interest		203		366
Capital loss carryovers		1,258		1,618
Charitable contribution carryovers		12		24
Employee bonuses		238		184
Accrued liabilities		105		181
Alternative minimum tax credit carryforward		426		302
Derivative instruments		168		189
Other		73		311
Total deferred tax assets before valuation allowance		34,772		36,633
Less valuation allowance-AOCI		(1,407)		(1,099)
Less valuation allowance-Other		(25,177)		(29,474)
Deferred tax assets, net of valuation allowance		8,188		6,060
Deferred tax liabilities
Penalties on delinquent tax certificates		25		35
Unrealized gains on AFS equity securities		—		151
Prepaid deductions		121		43
Other		153		114
Total deferred tax liabilities		299		343
Net deferred tax asset, included in other assets	$	7,889	$	5,717