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INCOME TAXES | 12 Months Ended
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Dec. 31, 2014
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The Company files income tax returns in the U.S. federal jurisdiction and the Commonwealth of Pennsylvania. The Bank also files an income tax return in the State of Maryland. The Company is no longer subject to U.S. federal, state or local income tax examination by tax authorities for years before 2011. The components of federal income tax expense for the years ended December 31 are summarized as follows:
(Dollars in thousands) | 2014 |  | 2013 |  | 2012
Current year provision (benefit): |  |  |  |  |
Federal | $ | 81 |  |  | $ | 60 |  |  | $ | (12,383 | )
State | 10 |  |  | (266 | ) |  | (46 | )
| 91 |  |  | (206 | ) |  | (12,429 | )
Deferred tax expense (benefit) |  |  |  |  |
Federal | 2,723 |  |  | 1,253 |  |  | 143 |
State | 18 |  |  | 18 |  |  | 6 |
| 2,741 |  |  | 1,271 |  |  | 149 |
Change in valuation allowance on deferred taxes | (18,964 | ) |  | (1,271 | ) |  | 20,235 |
Net federal income tax expense (benefit) | $ | (16,132 | ) |  | $ | (206 | ) |  | $ | 7,955 |
A reconciliation of the effective applicable income tax rate to the federal statutory rate for the years ended December 31, is as follows:
| 2014 |  | 2013 |  | 2012
Statutory federal tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Increase/(decrease) resulting from: |  |  |  |  |
State taxes, net of federal benefit | 0.1 | % |  | (1.8 | )% |  | 0.1 | %
Tax exempt interest income | (7.3 | )% |  | (11.9 | )% |  | 4.8 | %
Valuation allowance on deferred tax assets | (145.8 | )% |  | (13.0 | )% |  | (66.4 | )%
Earnings from life insurance | (2.6 | )% |  | (3.4 | )% |  | 1.2 | %
Disallowed interest | 0.2 | % |  | 0.3 | % |  | (0.1 | )%
Low-income housing credits | (3.7 | )% |  | (2.2 | )% |  | 0.0 | %
Benefit of operating loss carryforward | 0.0 | % |  | (3.8 | )% |  | 0.0 | %
Other | 0.1 | % |  | (1.3 | )% |  | (0.7 | )%
Effective income tax rate | (124.0 | )% |  | (2.1 | )% |  | (26.1 | )%
The provision for income taxes includes $677,000, $116,000 and $1,688,000 of applicable income tax expense related to net security gains for the years ended December 31, 2014, 2013, and 2012. The components of the net deferred tax asset, included in other assets, at December 31, are as follows:
(Dollars in thousands) | 2014 |  | 2013
Deferred tax assets: |  |  |
Allowance for loan losses | $ | 5,424 |  |  | $ | 7,776 |
Deferred compensation | 528 |  |  | 510 |
Retirement plans and salary continuation | 1,695 |  |  | 1,585 |
Share-based compensation | 102 |  |  | 191 |
Off balance sheet commitment reserves | 205 |  |  | 204 |
Nonaccrual loan interest | 210 |  |  | 341 |
Net unrealized losses on securities available for sale | 0 |  |  | 2,592 |
Goodwill | 154 |  |  | 184 |
Bonus accrual | 396 |  |  | 0 |
Low income housing credit carryforward | 1,322 |  |  | 1,022 |
Alternative minimum tax credit carryforward | 1,291 |  |  | 664 |
Charitable contribution carryforward | 209 |  |  | 333 |
Net operating loss carryforward | 6,606 |  |  | 8,169 |
Other | 237 |  |  | 178 |
Total deferred tax assets | 18,379 |  |  | 23,749 |
Valuation allowance | 0 |  |  | (18,964 | )
| 18,379 |  |  | 4,785 |
Deferred tax liabilities: |  |  |
Depreciation | 955 |  |  | 1,116 |
Net unrealized gains on securities available for sale | 848 |  |  | 0 |
Mortgage servicing rights | 606 |  |  | 582 |
Purchase accounting adjustments | 421 |  |  | 495 |
Other | 174 |  |  | 0 |
Total deferred tax liabilities | 3,004 |  |  | 2,193 |
Net deferred tax asset | $ | 15,375 |  |  | $ | 2,592 |
As of December 31, 2014, the Company has charitable contribution, low-income housing, and net operating loss carryforwards that expire through 2019, 2034, and 2032, respectively. In assessing whether or not some or all of our deferred tax asset is more likely than not to be realized in the future, management considers all positive and negative evidence, including projected future taxable income, tax planning strategies and recent financial operating results. Based upon our evaluation of both positive and negative evidence, a full valuation on the net deferred tax assets was established as of September 30, 2012. Specifically, it was felt that the negative evidence, which included recent cumulative history of operating losses, deterioration in asset quality and resulting impact on profitability, and that we had exhausted our carryback availability, outweighed the positive evidence, and the reserve was established. Each subsequent quarter-end, the Company continued to weigh both positive and negative evidence and re-analyzed its position that a valuation allowance was required. At December 31, 2014, management noted the Company’s profitable operations over the past nine quarters, improvements in asset quality, strengthened capital position, reduced regulatory risk, as well as improvement in economic conditions. Based on this analysis, management determined that a full valuation allowance was no longer necessary, and the full amount was recaptured as of December 31, 2014. The ultimate realization of deferred tax assets is dependent upon existence, or generation, of taxable income in the periods when those temporary differences and net operating loss and credit carryforwards are deductible. Management considered projected future taxable income, length of time needed for carryforwards to reverse, available tax planning strategies, and other factors in making its assessment that it was more likely than not the net deferred tax assets would be realized, and recaptured the full valuation allowance at December 31, 2014.

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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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