10.INCOME TAXES

Allocation of federal and state income taxes between current and deferred portions is as follows:


	Years Ended
	December 31,
	2016		2015
	(In thousands)

Current tax provision:
Federal	$	514	$	1,051
State		121		258
		635		1,309
Deferred tax benefit:
Federal		(170)		(293)
State		(48)		(85)
		(218)		(378)

Total tax provision	$	417	$	931

The differences between the statutory federal income tax rate and the effective tax rates are as follows:


	Years Ended
	December 31,
	2016		2015

Statutory rate	34.0	%	34.0	%
Increase (decrease) resulting from:
State taxes, net of federal tax benefit	7.8		4.7
Bank-owned life insurance	(5.8)		(1.4)
Stock compensation plans	8.7		1.5
Interest income from municipal securities	(4.2)		(0.8)
Merger related expense, non-deductible	27.3		—
Other, net	0.4		—

Effective tax rates	68.2	%	38.0	%

The components of the net deferred tax asset included in other assets are as follows:


	At December 31,
	2016		2015
	(In thousands)
Deferred tax assets:
Federal	$	1,534	$	1,320
State		439		384
		1,973		1,704
Deferred tax liabilities:
Federal		(499)		(498)
State		(141)		(141)
		(640)		(639)

Net deferred tax asset	$	1,333	$	1,065

The tax effects of each item that gives rise to deferred taxes are as follows:


	At December 31,
	2016		2015
	(In thousands)

Deferred compensation	$	725	$	612
Net unrealized loss (gain) on securities available for sale		21		(29)
Depreciation and amortization		(543)		(363)
Allowance for loan losses		1,042		964
Mortgage servicing rights		(94)		(207)
Other, net		182		88

Net deferred tax asset	$	1,333	$	1,065

A summary of the change in the net deferred tax asset is as follows:


	Years Ended
	December 31,
	2016		2015
	(In thousands)

Balance at beginning of period	$	1,065	$	635
Deferred tax benefit		218		378
Deferred tax effects of net unrealized loss (gain) on securities
available for sale		50		52

Balance at end of period	$	1,333	$	1,065

The federal income tax reserve for loan losses at the Company’s base year is $726,000. If any portion of the reserve is used for purposes other than to absorb loan losses, approximately 150% of the amount actually used (limited to the amount of the reserve) would be subject to taxation in the fiscal year in which it is used. As the Company intends to use the reserve solely to absorb loan losses, a deferred tax liability of $290,000 has not been provided.

Uncertain tax positions

It is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. As of December 31, 2016 and 2015, there were no material uncertain tax positions related to federal and state income tax matters. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and state taxing authorities for the years ended December 31, 2013 through December 31, 2016.