11. INCOME TAXES

The provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2015	2014	2013
Currently payable	$ 2,913	$ 3,081	$ 3,082
Deferred taxes	(192)	478	670
Provision for income taxes	$ 2,721	$ 3,559	$ 3,752

The following temporary differences gave rise to the net deferred tax asset and liabilities at December 31, 2015 and 2014, respectively (in thousands):

	2015	2014
Deferred tax assets:
Allowance for loan losses	$ 4,238	$ 2,317
Deferred compensation	772	503
Merger & acquisition costs	20	24
Allowance for losses on available-for-sale securities	436	420
Pension and other retirement obligation	1,483	658
Interest on non-accrual loans	1,001	825
Incentive plan accruals	362	352
Other real estate owned	136	24
Low income housing tax credits	63	33
NOL carry forward	950	-
AMT Credit Carryforward	152	-
Other	157	78
Total	$ 9,770	$ 5,234

Deferred tax liabilities:
Premises and equipment	$ (919)	$ (306)
Investment securities accretion	(177)	(302)
Loan fees and costs	(154)	(166)
Goodwill and core deposit intangibles	(3,594)	(2,734)
Mortgage servicing rights	(238)	(161)
Unrealized gains on available-for-sale securities	(1,135)	(1,594)
Other	(44)	-
Total	(6,261)	(5,263)
Deferred tax asset (liability), net	$ 3,509	$ (29)

No valuation allowance was established at December 31, 2015 and 2014, due to the Company’s ability to carryback to taxes paid in previous years and certain tax strategies, coupled with the anticipated future taxable income as evidenced by the Company’s earnings potential.

The total provision for income taxes is different from that computed at the statutory rates due to the following items (in thousands):

	Year Ended December 31,
	2015	2014	2013
Provision at statutory rates on
pre-tax income	$ 4,878	$ 5,761	$ 5,823
Effect of tax-exempt income	(1,915)	(1,865)	(1,752)
Low income housing tax credits	(198)	(198)	(198)
Bank owned life insurance	(214)	(172)	(171)
Nondeductible interest	61	60	70
Nondeductible merger and acquisition expenses	102	-	-
Other items	7	(27)	(20)
Provision for income taxes	$ 2,721	$ 3,559	$ 3,752
Statutory tax rates	34%	34%	34%
Effective tax rates	19.0%	21.0%	21.9%

The Company prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. With limited exception, the Company’s federal and state income tax returns for taxable years through 2011 have been closed for purposes of examination by the federal and state taxing jurisdictions.

Investments in Qualified Affordable Housing Projects

As of December 31, 2015 and 2014, the Company was invested in four partnerships that provide affordable housing. The balance of the investments, which is included within other assets in the Consolidated Balance Sheet, was $959,000 and $1,218,000 as of December 31, 2015 and 2014, respectively. Investments purchased prior to January 1, 2015, are accounted for utilizing the effective yield method. As of December 31, 2015, the Company has $1,044,000 of tax credits remaining that will be recognized over seven years. Tax credits of $198,000 were recognized as a reduction of tax expense during 2015. Included within other expenses on the Consolidated Statement of Income was $259,000 of amortization of the investments in qualified affordable housing projects.