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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 12 — INCOME TAXES Income tax expense consisted of the following:
|  | Years Ended December 31, |
(Dollars in thousands) |  | 2018 |  |  | 2017 |  |  | 2016 |
Income tax expense: |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 14,091 |  |  | $ | 14,714 |  |  | $ | 10,922 |
Deferred |  |  | 708 |  |  |  | 10,174 |  |  |  | 1,941 |
Change in valuation allowance for deferred tax asset |  |  | (7 | ) |  |  | (10 | ) |  |  | (54 | )
Income tax expense |  | $ | 14,792 |  |  | $ | 24,878 |  |  | $ | 12,809 |
Effective tax rates differ from federal statutory rates applied to income before income taxes due to the following:
|  | Years Ended December 31, |
(Dollars in thousands) |  | 2018 |  |  | 2017 |  |  | 2016 |
Tax provision computed at federal statutory rate |  | $ | 13,965 |  |  | $ | 21,384 |  |  | $ | 11,728 |
Effect of: |  |  |  |  |  |  |  |  |  |  |  |
State taxes, net |  |  | 1,716 |  |  |  | 1,112 |  |  |  | 852 |
Tax reform impact(1) |  |  | — |  |  |  | 2,984 |  |  |  | — |
Transaction costs |  |  | — |  |  |  | — |  |  |  | 325 |
Bank-owned life insurance |  |  | (141 | ) |  |  | (246 | ) |  |  | (201 | )
Tax exempt interest |  |  | (436 | ) |  |  | (545 | ) |  |  | (129 | )
Change in valuation allowance for deferred tax asset |  |  | (7 | ) |  |  | (10 | ) |  |  | (54 | )
Other |  |  | (305 | ) |  |  | 199 |  |  |  | 288 |
Income tax expense |  | $ | 14,792 |  |  | $ | 24,878 |  |  | $ | 12,809 |
(1) On December 22, 2017, the United States enacted tax reform legislation commonly known as the Tax Cuts and Jobs Act (the “Tax Act”), resulting in significant modifications to existing law. As a result of the changes under the Tax Act, the Company recorded incremental income tax expense of $2,984,000 during the year ended December 31, 2017, which consisted primarily of the remeasurement of deferred tax assets and liabilities at the new federal statutory rate of 21%. Prior to the enactment of the Tax Act, deferred tax assets and liabilities were measured at the previous federal statutory rate of 35%. Deferred income taxes reflect the net tax effects of temporary differences between the recorded amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
(Dollars in thousands) |  | 2018 |  |  | 2017 |
Deferred tax assets |  |  |  |  |  |  |  |
Federal net operating loss carryforwards |  | $ | 6,111 |  |  | $ | 7,180 |
State net operating loss carryforwards |  |  | 541 |  |  |  | 1,338 |
Acquired loan basis |  |  | 587 |  |  |  | 1,159 |
Other real estate owned |  |  | 134 |  |  |  | 394 |
AMT credit carryforward |  |  | 2,855 |  |  |  | 2,855 |
Allowance for loan losses |  |  | 6,382 |  |  |  | 4,825 |
Unrealized loss on securities available for sale |  |  | 356 |  |  |  | 176 |
Accrued liabilities |  |  | 1,714 |  |  |  | 333 |
Other |  |  | 1,537 |  |  |  | 885 |
Total deferred tax assets |  |  | 20,217 |  |  |  | 19,145 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Goodwill and intangible assets |  |  | 1,661 |  |  |  | 2,233 |
Fair value adjustment on junior subordinated debentures |  |  | 2,468 |  |  |  | 2,792 |
Premises and equipment |  |  | 4,804 |  |  |  | 2,273 |
Installment gain on sale of subsidiary |  |  | 2,292 |  |  |  | 2,230 |
Other |  |  | 299 |  |  |  | 396 |
Total deferred tax liabilities |  |  | 11,524 |  |  |  | 9,924 |
Net deferred tax asset before valuation allowance |  |  | 8,693 |  |  |  | 9,221 |
Valuation allowance |  |  | (255 | ) |  |  | (262 | )
Net deferred tax asset |  | $ | 8,438 |  |  | $ | 8,959 |
The Company's federal and state net operating loss carryforwards as of December 31, 2018 were $29,102,000 and $16,829,000, respectively, which will expire at various dates from 2021 through 2035. The Company has a Federal Alternative Minimum Tax Credit carryforward of $2,855,000 as of December 31, 2018 with no expiration. The Company has a valuation allowance on certain net operating loss carryforwards that are not expected to be realized before expiration. The Company's federal and state net operating loss carryforwards as of December 31, 2017 were $34,190,000 and $23,641,000, respectively. The Company had a Federal Alternative Minimum Tax Credit carryforward of $2,855,000 as of December 31, 2017. An Internal Revenue Code Section 382 (“Section 382”) ownership change was triggered as part of previous acquisitions. A significant portion of the deferred tax asset relating to the Company's net operating loss and Alternative Minimum Tax credit carryforwards are subject to the annual limitation rules under Section 382 . The utilization of tax carryforward attributes acquired from the EJ Financial Corp. (2010) acquisition is subject to an annual limitation of $341,000. The utilization of tax carryforward attributes acquired from the National Bancshares, Inc.(2013) acquisition is subject to an annual limitation of $2,040,000. Any remaining tax attribute carryforwards generated prior to the Section 382 ownership change in 2013 are subject to an annual limitation of $3,696,000. The utilization of deferred tax assets related to the net operating loss and tax credit carryforwards acquired from the 2016 ColoEast stock acquisition are subject to an annual limitation of $1,906,000 under Section 382 rules. At December 31, 2018 and 2017, the Company had no amounts recorded for uncertain tax positions and does not expect any material changes in uncertain tax benefits during the next 12 months. The Company recognizes interest and penalties related to income tax matters in income tax expense. The Company is subject to U.S. federal income tax as well as income tax in various states. The Company is generally not subject to examination by taxing authorities for years prior to 2015.

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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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