ACCESS NATIONAL CORP

Note 7. Income Taxes

Net deferred tax assets consisted of the following components as of December 31, 2016 and 2015:

	December 31,
	2016		2015
	(In Thousands)
Deferred tax assets:
Allowance for loan losses	$	5,760	$	4,838
Deferred fees		857		713
Allowance for loan losses on mortgage loans sold		557		573
Allowance for off balance sheet losses		270		268
Stock options		79		52
Securities available for sale		869		551
Land impairment		-		252
Other		197		141
	$	8,589	$	7,388
Deferred tax liability:
Depreciation	$	147	$	173
Other		88		58
	$	235	$	231
Net deferred tax assets included in other assets	$	8,354	$	7,157

The provision for income taxes charged to operations for the years ended December 31, 2016, 2015, and 2014 consisted of the following:

	Year Ended December 31,
	2016		2015		2014
	(In Thousands)

Current tax expense	$	9,898	$	8,711	$	6,691
Deferred tax (benefit)		(698)		(534)		894
	$	9,200	$	8,177	$	7,585

The income tax provision differs from the amount of income tax determined by applying the U.S. Federal income tax rate to pretax income for the years ended December 31, 2016, 2015, and 2014 as follows:

	Year Ended December 31,
	2016		2015		2014
	(In Thousands)
Computed "expected" tax expense	$	8,961	$	8,259	$	7,529
Increase (decrease) in income taxes resulting from:
State income taxes		117		92		62
Tax exempt income and interest		(409)		(257)		(164)
Merger related expenses		344		-		-
Other		187		83		158
	$	9,200	$	8,177	$	7,585

As of December 31, 2016 and 2015, the Corporation did not have any unrecognized tax benefits. The Corporation does not expect a significant increase or decrease in the next 12 months of unrecognized tax benefits. The Corporation recognizes interest and penalties related to unrecognized tax benefits as Interest Expense and Other Noninterest Expense, respectively, and not as part of the tax provision. The Corporation did not recognize a material amount of interest expense or penalties for the years ended December 31, 2016, 2015 and 2014. In addition, there were no interest or penalties accrued at December 31, 2016 or 2015. The Corporation is no longer subject to examination for federal and state purposes for tax years prior to 2013.