11. INCOME TAXES

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

	Year Ended December 31,
	2014	2013	2012
Currently payable	$ 3,081	$ 3,082	$ 4,389
Deferred tax liability (asset)	478	670	(58)
Provision for income taxes	$ 3,559	$ 3,752	$ 4,331

The following temporary differences gave rise to the net deferred tax liabilities at December 31, 2014 and 2013 (in thousands):

	2014	2013
Deferred tax assets:
Allowance for loan losses	$ 2,317	$ 2,413
Deferred compensation	503	528
Merger & acquisition costs	24	29
Allowance for losses on available-for-sale securities	420	523
Pension and other retirement obligation	658	90
Interest on non-accrual loans	825	793
Incentive plan accruals	352	330
Other real estate owned expenses	24	72
Unrealized losses on available-for-sale securities	-	55
Low income housing tax credits	33	1
Other	78	94
Total	$ 5,234	$ 4,928

Deferred tax liabilities:
Premises and equipment	$ (306)	$ (348)
Investment securities accretion	(302)	(310)
Loan fees and costs	(166)	(184)
Goodwill and core deposit intangibles	(2,734)	(2,431)
Mortgage servicing rights	(161)	(180)
Unrealized gains on available-for-sale securities	(1,594)	-
Total	(5,263)	(3,453)
Deferred tax (liability) asset, net	$ (29)	$ 1,475

No valuation allowance was established at December 31, 2014 and 2013, in view of 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,
	2014	2013	2012
Provision at statutory rates on
pre-tax income	$ 5,761	$ 5,823	$ 6,306
Effect of tax-exempt income	(1,865)	(1,752)	(1,853)
Low income housing tax credits	(198)	(198)	(57)
Bank owned life insurance	(172)	(171)	(172)
Nondeductible interest	60	70	87
Valuation allowance	-	-	-
Other items	(27)	(20)	20
Provision for income taxes	$ 3,559	$ 3,752	$ 4,331
Statutory tax rates	34%	34%	34%
Effective tax rates	21.0%	21.9%	23.4%

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 2010 have been closed for purposes of examination by the federal and state taxing jurisdictions.