16. Income Taxes

The components of income tax expense for the three years ended December 31 were (in thousands):


		2015		2014		2013
Current tax (benefit) expense	$	149	$	331	$	(157)
Deferred tax expense (benefit)		(66)		194		662
Total tax expense	$	83	$	525	$	505

A reconciliation of the statutory income tax expense computed at 34% to the income tax expense included in the consolidated statements of income follows (dollars in thousands):


	Years Ended December 31,
		2015		2014		2013
Income before income taxes	$	3,141	$	4,741	$	4,506
Statutory tax rate		34.0%		34.0%		34.0%
Federal tax at statutory rate		1,068		1,612		1,532
Tax-exempt interest		(391)		(358)		(354)
Net earnings on BOLI		(99)		(93)		(108)
Gain from life insurance proceeds		(34)		(56)		-
Dividend from unconsolidated subsidiary		(15)		(13)		(13)
Stock-based compensation		20		16		10
Federal tax credits		(570)		(575)		(556)
Merger and acquisition expenses		115		-		-
Other permanent differences		(11)		(8)		(6)
Total tax expense	$	83	$	525	$	505
Effective tax rate		2.6%		11.1%		11.2%

Deductible temporary differences and taxable temporary differences gave rise to a net deferred tax asset for the Company as of December 31, 2015 and 2014. The components giving rise to the net deferred tax asset are detailed below (in thousands):


		December 31,
		2015		2014
Deferred Tax Assets
Allowance for loan losses	$	489	$	675
Deferred directors' compensation		511		519
Employee and director benefits		534		553
Qualified pension liability		785		457
Unrealized loss from securities impairment		236		239
Investment in low income housing project		96		52
Fair value adjustments to acquired assets and liabilities		493		-
Tax credit carryforward		80		-
Other		104		57
Total deferred tax assets		3,328		2,552

Deferred Tax Liabilities
Depreciation		(288)		(199)
Equity income from unconsolidated subsidiary		(589)		(526)
Loan origination costs		(412)		(348)
Prepaid expense		(284)		(138)
Unrealized gains on securities available for sale		(58)		(148)
Annuity earnings		(73)		(68)
Fair value of mortgage servicing rights		(70)		(66)
Intangible assets		(67)		-
Goodwill		(433)		(387)
Total deferred tax liabilities		(2,274)		(1,880)

Net deferred tax asset
included in other assets	$	1,054	$	672

The Company has concluded that the deferred tax assets are realizable (on a more likely than not basis) through the combination of future reversals of existing taxable temporary differences, certain tax planning strategies and expected future taxable income.

It is the Company’s policy to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Income. No significant income tax uncertainties were identified as a result of the Company’s evaluation of its income tax position. Therefore, the Company recognized no adjustment for unrecognized income tax benefits for the years ended December 31, 2015, 2014 and 2013. The Company is no longer subject to examination by taxing authorities for years before 2012. Tax years 2012 through the present, with limited exception, remain open to examination.