13. INCOME TAXES

The expense for income taxes is summarized below:

	YEAR ENDED DECEMBER 31,
	2016		2015		2014
	(IN THOUSANDS)
Current	$	483	$	1,455	$	1,036
Deferred		414		888		562
Income tax expense	$	897	$	2,343	$	1,598

The reconciliation between the federal statutory tax rate and the Company’s effective consolidated income tax rate is as follows:

	YEAR ENDED DECEMBER 31,
	2016						2015						2014
	AMOUNT			RATE			AMOUNT			RATE			AMOUNT			RATE
	(IN THOUSANDS, EXCEPT PERCENTAGES)
Income tax expense based on federal statutory rate	$	1,090			34.0	%	$	2,836			34.0	%	$	1,571			34.0	%
Tax exempt income		(255	)		(7.9	)		(574	)		(6.9	)		(274	)		(5.9	)
Other		62			1.9			81			1.0			301			6.5
Total expense for income taxes	$	897			28.0	%	$	2,343			28.1	%	$	1,598			34.6	%

The following table highlights the major components comprising the deferred tax assets and liabilities for each of the periods presented:

	AT DECEMBER 31,
	2016			2015
	(IN THOUSANDS)
DEFERRED TAX ASSETS:
Allowance for loan losses	$	3,377		$	3,373
Unfunded commitment reserve		303			298
Unrealized investment security losses		87			—
Premises and equipment		1,542			1,602
Accrued pension obligation		2,582			1,658
Alternative minimum tax credits		2,110			2,248
Other		895			487
Total tax assets		10,896			9,666
DEFERRED TAX LIABILITIES:
Investment accretion		(24	)		(16	)
Unrealized investment security gains		—			(420	)
Other		(217	)		(237	)
Total tax liabilities		(241	)		(673	)
Net deferred tax asset	$	10,655		$	8,993

At December 31, 2016 and 2015, the Company had no valuation allowance established against its deferred tax assets as we believe the Company will generate sufficient future taxable income to fully utilize alternative minimum tax (AMT) credits.

The change in net deferred tax assets and liabilities consist of the following:

	YEAR ENDED DECEMBER 31,
	2016			2015
	(IN THOUSANDS)
Unrealized gains recognized in comprehensive income	$	507		$	530
Pension obligation of the defined benefit plan not yet recognized in income		1,569			(197	)
Deferred provision for income taxes		(414	)		(888	)
Net increase (decrease)	$	1,662		$	(555	)

The Company has AMT credit carryforwards of approximately $2.1 million at December 31, 2016. These credits have an indefinite carryforward period. The Company has fully recognized all of its net operating loss carryforward in 2015.

The Company utilizes 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 fifty 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. The Company has no tax liability for uncertain tax positions. The Company’s federal and state income tax returns for taxable years through 2013 have been closed for purposes of examination by the Internal Revenue Service and the Pennsylvania Department of Revenue.