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Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Taxes |
Income Taxes | Note 1 1: Income Taxes Income tax expense (benefit) for year ending December 31, 2014, 2013 and 2012 were as follows:
|  | 2014 |  | 2013 |  | 2012
Current federal |  | $ | 122 |  | $ | 105 |  | $ | -
Current state |  |  | 6 |  |  | 29 |  |  | -
Deferred federal |  |  | 3,120 |  |  | 2,780 |  |  | (302)
Deferred state |  |  | 4,876 |  |  | 989 |  |  | (436)
Change in valuation allowance |  |  | (2,363) |  |  | (74,145) |  |  | 738
|  | $ | 5,761 |  | $ | (70,242) |  | $ | -
The following were the components of the deferred tax assets and liabilities as of December 31, 2014 and December 31, 2013:
|  | 2014 |  | 2013
Allowance for loan losses |  | $ | 9,579 |  | $ | 12,725
Deferred compensation |  |  | 787 |  |  | 788
Amortization of core deposit |  |  | 1,859 |  |  | 1,656
Goodwill amortization/impairment |  |  | 13,129 |  |  | 15,252
Stock based compensation |  |  | 663 |  |  | 583
OREO write downs |  |  | 8,639 |  |  | 10,041
Federal net operating loss (“NOL”) carryforward |  |  | 27,001 |  |  | 28,023
State net operating loss (“NOL”) carryforward |  |  | 9,405 |  |  | 11,847
Deferred tax credit |  |  | 1,551 |  |  | 1,444
Other assets |  |  | 1,006 |  |  | 1,166
Total deferred tax assets |  |  | 73,619 |  |  | 83,525
Accumulated depreciation on premises and equipment |  |  | (802) |  |  | (1,035)
Accretion on securities |  |  | - |  |  | (8)
Mortgage servicing rights |  |  | (2,320) |  |  | (2,571)
State tax benefits |  |  | (5,290) |  |  | (6,994)
Other liabilities |  |  | (394) |  |  | (178)
Total deferred tax liabilities |  |  | (8,806) |  |  | (10,786)
Net deferred tax asset before valuation allowance |  |  | 64,813 |  |  | 72,739
Tax effect on net unrealized losses on securities |  |  | 5,328 |  |  | 4,927
Valuation allowance |  |  | - |  |  | (2,363)
Net deferred tax asset |  | $ | 70,141 |  | $ | 75,303
At December 31, 2014, the Company had a $77.1 million federal net operating loss carryforward of which, $21.8 million expires in 2030, $31.4 million expires in 2031, $8.6 million expires in 2032, and $15.3 million expires in 2033. The Company had a $121.4 million state net operating loss carryforward of which, $25.7 million expires in 2021, and $95.7 million expires in 2025. In addition, the Company had a $1.6 million alternative minimum tax credit subject to indefinite carryforward. Included in the tax effect on net unrealized losses in securities above are net unrealized losses on held-to-maturity securities that were transferred from available-for-sale securities of $2.8 million and $3.2 million as of December 31, 2014 and December 31, 2013, respectively.The components of the provision for deferred income tax expense (benefit) for the years ending December 31 were as follows:
| 2014 |  | 2013 |  | 2012
Provision for loan losses | $ | 3,146 |  | $ | 5,511 |  | $ | 6,125
Deferred Compensation |  | 1 |  |  | (109) |  |  | (51)
Amortization of core deposit |  | (203) |  |  | (691) |  |  | (382)
Stock based compensation |  | (80) |  |  | 202 |  |  | 326
OREO write-downs |  | 1,402 |  |  | 6,591 |  |  | (6,538)
Federal net operating loss carryforward |  | 1,022 |  |  | (7,287) |  |  | (926)
State net operating loss carryforward |  | 2,442 |  |  | (1,661) |  |  | (446)
Deferred tax credit |  | (107) |  |  | - |  |  | -
Depreciation |  | (233) |  |  | (28) |  |  | (202)
Net premiums and discounts on securities |  | (8) |  |  | (114) |  |  | 85
Mortgage servicing rights |  | (251) |  |  | 752 |  |  | 281
Goodwill amortization/impairment |  | 2,123 |  |  | 1,544 |  |  | 1,526
State tax benefits |  | (1,704) |  |  | (321) |  |  | 114
Change in valuation allowance |  | (2,363) |  |  | (74,145) |  |  | 738
Other, net |  | 446 |  |  | (620) |  |  | (650)
Total deferred tax expense | $ | 5,633 |  | $ | (70,376) |  | $ | -
Effective tax rates differ from federal statutory rates applied to financial statement income (loss) for the years ended December 31 due to the following:
|  | 2014 |  | 2013 |  | 2012
Tax at statutory federal income tax rate |  | $ | 5,564 |  | $ | 4,145 |  | $ | (25)
Nontaxable interest income, net of disallowed interest deduction |  |  | (233) |  |  | (245) |  |  | (192)
BOLI income |  |  | (508) |  |  | (694) |  |  | (563)
State income taxes, net of federal benefit |  |  | 872 |  |  | 662 |  |  | (53)
Change in valuation allowance |  |  | (2,363) |  |  | (74,145) |  |  | 738
Deficiency from restricted stock |  |  | - |  |  | 10 |  |  | 299
Impact of Illinois tax rate change |  |  | 2,363 |  |  | - |  |  | -
Other, net |  |  | 66 |  |  | 25 |  |  | (204)
Tax at effective tax rate |  | $ | 5,761 |  | $ | (70,242) |  | $ | -
The Company recorded a tax expense of $5.8 million on $15.9 million pre-tax income for the year ended December 31, 2014. The tax expense was composed of $128,000 in current income tax expense and $8.0 million in deferred income tax expense offset by a $2.4 million reversal of the deferred tax valuation allowance reserve. The Company evaluated positive and negative evidence in order to determine if it was more likely than not that the deferred tax asset would be recovered through future income. Significant positive evidence evaluated included recent and projected earnings, significantly improved asset quality and an improved capital position. Negative evidence identified included a reduction in net interest margin as a result of the current rate environment, and historic runoff of loans. After evaluating all of the evidence, the Company believes it will more likely than not utilize the net deferred tax assets and reversed the valuation reserve on the net deferred tax asset of $2.4 million in the fourth quarter of 2014. The most important factor leading to this Company conclusion is the management belief that Company earnings have stabilized. The $2.4 million of tax benefit from the reversal of the deferred tax valuation reserve offsets by the impact of the state rate change from 9.50% to 7.75% effective on January 1, 2015.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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