INCOME TAXES

The provision for (benefit from) income taxes for the years ended December 31, 2014, 2013, and 2012 consisted of the following (in thousands):



	Federal			State			Total
2014
Current	$	(125	)	$	(37	)	$	(162	)
Deferred	(397		)	(11		)	(408		)
Benefit from income taxes	$	(522	)	$	(48	)	$	(570	)
2013
Current	$	2,217		$	(445	)	$	1,772
Deferred	(645		)	220			(425		)
Provision for (benefit from) income taxes	$	1,572		$	(225	)	$	1,347
2012
Current	$	1,196		$	49		$	1,245
Deferred	249			191			440
Provision for income taxes	$	1,445		$	240		$	1,685

The determination of the amount of deferred income tax assets which are more likely than not to be realized is primarily dependent on projections of future earnings, which are subject to uncertainty and estimates that may change given economic conditions and other factors. The realization of deferred income tax assets is assessed and a valuation allowance is recorded if it is more likely than not that all or a portion of the deferred tax asset will not be realized. More likely than not is defined as greater than a 50% chance. All available evidence, both positive and negative is considered to determine whether, based on the weight of the evidence, a valuation allowance is needed. Based on management’s analysis as of December 31, 2014 and 2013, the Company established a deferred tax valuation allowance in the amount of $20,000 and $108,000, respectively, for California capital loss carryforwards.

Deferred tax assets (liabilities) consisted of the following (in thousands):



	December 31,
	2014			2013
Deferred tax assets:
Allowance for credit losses	$	3,188		$	3,492
Deferred compensation	4,979			5,102
Unrealized loss on available-for-sale investment securities	—			1,598
Net operating loss carryovers	698			206
Bank premises and equipment	186			264
Mark to market adjustment	98			154
Other deferred	511			601
Other than temporary impairment	267			289
Loan and investment impairment	887			1,914
State Enterprise Zone credit carry-forward	1,444			981
State capital loss carry-forward	20			108
Alternative minimum tax credit	3,338			2,238
Partnership income	70			70
State taxes	1			32
Other	—			—
Total deferred tax assets	15,687			17,049
Valuation allowance	(20		)	(108		)
Net deferred tax asset after valuation allowance	15,667			16,941
Deferred tax liabilities:
Finance leases	(1,871		)	(1,963		)
Unrealized gain on available-for-sale investment securities	(3,661		)	—
Core deposit intangible	(553		)	(692		)
FHLB stock	(319		)	(319		)
Loan origination costs	(553		)	(406		)
Total deferred tax liabilities	(6,957		)	(3,380		)
Net deferred tax assets	$	8,710		$	13,561

The provision for income taxes differs from amounts computed by applying the statutory Federal income tax rates to operating income before income taxes. The significant items comprising these differences for the years ended December 31, 2014, 2013, and 2012 consisted of the following:



	2014		2013		2012
Federal income tax, at statutory rate	34.0	%	34.0	%	34.0	%
State taxes, net of Federal tax benefit	(0.7	)%	0.4	%	2.8	%
Tax exempt investment security income, net	(42.2	)%	(20.5	)%	(16.7	)%
Bank owned life insurance, net	(3.9	)%	(1.8	)%	(1.4	)%
Solar credits	(2.4	)%	(1.4	)%	(1.4	)%
Change in uncertain tax positions	—	%	(1.4	)%	0.5	%
Change in prior year estimates	0.1	%	1.4	%	—	%
Other	3.1	%	3.4	%	0.5	%
Effective tax rate	(12.0	)%	14.1	%	18.3	%

At December 31, 2014, the Company had Federal net operating loss (“NOL”) carry-forwards of approximately $1,694,000. The Federal NOL will begin to expire in 2034. At December 31, 2014, the Company had a Federal Alternative Minimum Tax credit of approximately $3,338,000 which does not expire, and a California NOL of $1,712,000, from prior business combinations that is subject to Internal Revenue Code (IRC) Sec. 382 annual limitations. The California NOL will begin to expire in 2029. The Company had Enterprise Zone Credits of approximately $2,188,000 which begin expiring in 2023. In addition, the Company had a California capital loss carry-forward of $282,000 which will expire at the end of 2015. Management expects to fully utilize the value of all carry-forward amounts with the exception of the California capital loss. Management has established a valuation allowance for this carry-forward as of December 31, 2014.

The Company and its Subsidiary file income tax returns in the U.S. federal and California jurisdictions. The Company conducts all of its business activities in the State of California. At December 31, 2014, the Company had one state income tax examination in process by the California Franchise Tax Board for the years ended December 31, 2011 and 2012. The outcome of the examination is not settled. There are no pending U.S. federal or local income tax examinations by those taxing authorities. The Company is no longer subject to the examination by U.S. federal taxing authorities for the years ended before December 31, 2011 and by the state and local taxing authorities for the years ended before December 31, 2010.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):



	December 31,
	2014		2013
Balance, beginning of year	$	180	$	316
Additions based on tax positions related to the current year	—		55
Reductions for tax positions of prior years	—		(191		)
Balance, end of year	$	180	$	180

This represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months.

During the years ended December 31, 2014, 2013, and 2012, the Company did not recognize any interest or penalties related to uncertain tax positions.