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INCOME TAXES | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
INCOME TAXES | NOTE 13 – INCOME TAXES On December 22, 2017, the Tax Cuts and Jobs Act (“Act”) was enacted into law and, among other items, reduces the corporate income tax rate from 35% to 21%, effective January 1, 2018. The enactment of this law resulted in a lower federal income tax rate resulting in a reduction of the benefit provided by the Company’s existing deferred tax assets. In accordance with ASC Topic 740, “Income Taxes”, the Company revalued its net deferred tax asset based on facts and circumstances available for the reporting period ending December 31, 2017 in which the Act was enacted and through the time the Company issues its financial statements for that reporting period. As a result of this revaluation, the Company recorded a non-cash, non-operating and non-recurring income tax provision of $4.1 million for the period ending December 31, 2017. In addition, through the preparation the Company’s 2017 corporate tax return and the completion of cost segregation studies on new construction projects, the Company recognized a tax benefit of $408,000 for the year ending December 31, 2018. Income tax expense for the years ended December 31, 2018, 2017 and 2016 consisted of the following:
(dollars in thousands) | 2018 |  | 2017 |  | 2016
Current federal | $16,871 |  | $27,064 |  | $23,749
Deferred federal | 707 |  | (199) |  | 268
Revalue deferred taxes due to tax reform | (408) |  | 4,137 |  | 0
Current state | 1,462 |  | 1,559 |  | 1,086
Deferred state | (99) |  | (257) |  | 30
Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $18,533 |  | $32,304 |  | $25,133
Income tax expense included an expense (benefit) of ($10,000), $11,000 and $23,000 applicable to security transactions for 2018, 2017 and 2016. The differences between financial statement tax expense and amounts computed by applying the statutory federal income tax rate of 21% for 2018 and 35% for 2017 and 2016 to income before income taxes were as follows:
(dollars in thousands) | 2018 |  | 2017 |  | 2016
Income taxes at statutory federal rate of 21% (2018) and 35% (prior years) | $20,778 |  | $31,372 |  | $27,026
Increase (decrease) in taxes resulting from: |  |  |  |  |
Tax exempt income | (1,434) |  | (2,015) |  | (1,498)
Nondeductible expense | 165 |  | 193 |  | 190
State income tax, net of federal tax effect | 1,077 |  | 846 |  | 726
Captive insurance premium income | (292) |  | (378) |  | (361)
Tax credits | (412) |  | (326) |  | (311)
Bank owned life insurance | (303) |  | (619) |  | (554)
Long - term incentive plan | (641) |  | (854) |  | 0
Revaluation deferred tax asset at 21% rate | (408) |  | 4,137 |  | 0
Other | 3 |  | (52) |  | (85)
Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $18,533 |  | $32,304 |  | $25,133
The net deferred tax asset recorded in the consolidated balance sheets at December 31, 2018 and 2017 consisted of the following:
(dollars in thousands) | 2018 |  | 2017
Deferred tax assets: |  |  |
Bad debts | $12,478 |  | $12,043
Pension and deferred compensation liability | 1,188 |  | 1,028
Nonaccrual loan interest | 937 |  | 970
Long-term incentive plan | 2,357 |  | 2,043
Other | 506 |  | 403
| 17,466 |  | 16,487
Deferred tax liabilities: |  |  |
Depreciation | 4,583 |  | 3,614
Loan servicing rights | 877 |  | 793
State taxes | 447 |  | 426
Intangible assets | 1,280 |  | 1,261
REIT spillover dividend | 1,231 |  | 1,242
Prepaid expenses | 786 |  | 752
Other | 475 |  | 412
| 9,679 |  | 8,500
Valuation allowance | 0 |  | 0
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $7,787 |  | $7,987
In addition to the net deferred tax assets included above, the deferred income tax asset/liability allocated to the unrealized net gain/(loss) on securities available for sale included in equity was $1.3 million and ($226,000) for 2018 and 2017. The deferred income tax asset allocated to the pension plan and SERP included in equity was $462,000 and $625,000 for 2018 and 2017, respectively. The Company evaluated its deferred tax asset at year end 2018 and has concluded that it is more likely than not that it will be realized. The Company expects to have taxable income in the future such that the deferred tax asset will be realized. Therefore, no valuation allowance is required. Unrecognized Tax Benefits The Company did not have any unrecognized tax benefits at December 31, 2018 or 2017. The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months. No interest or penalties were recorded in the income statement and no amount was accrued for interest and penalties for the period ending December 31, 2018, 2017 and 2016. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is the Company’s policy to record such accruals in its income taxes accounts. The Company and its subsidiaries file a consolidated U.S. federal tax return and a combined unitary return in the States of Indiana and Michigan. These returns are subject to examinations by authorities for all years after 2014.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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