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Income Tax
 12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income Tax
Note 18 – Income Tax
 
 
 
December 31

2018
 
 
December 31

2017
 
 
December 31

2016
 
Income tax expense
 
 
 
 
 
 
 
 
 
 
 
 
Currently payable
 
 
 
 
 
 
 
 
 
 
 
 
Federal
 
$
9,166
 
 
$
12,079
 
 
$
7,467
 
Deferred
 
 
 
 
 
 
 
 
 
 
 
 
Federal
 
 
1,277
 
 
 
331
 
 
 
1,334
 
Revaluation of deferred tax assets
 
 
—
 
 
 
2,426
 
 
 
—
 
Total income tax expense
 
$
10,443
 
 
$
14,836
 
 
$
8,801
 
Reconciliation of federal statutory to actual tax expense
 
 
 
 
 
 
 
 
 
 
 
 
Federal statutory income tax at 21% in 2018 and
35
% in 2017 and 2016
 
$
13,348
 
 
$
16,783
 
 
$
11,450
 
Tax exempt interest
 
 
(1,982
)
 
 
(2,699
)
 
 
(1,882
)
Tax exempt income
 
 
(448
)
 
 
(638
)
 
 
(575
)
Stock compensation
 
 
(384
)
 
 
(546
)
 
 
—
 
Revaluation of deferred tax assets
 
 
—
 
 
 
2,426
 
 
 
—
 
Other tax exempt income
 
 
(260
)
 
 
(456
)
 
 
(608
)
Nondeductible and other
 
 
169
 
 
 
(34
)
 
 
416
 
Actual tax expense
 
$
10,443
 
 
$
14,836
 
 
$
8,801
 
 
 
 
December 31

2018
 
 
December 31

2017
 
Assets
 
 
 
 
 
 
 
 
Allowance for loan losses
 
$
3,831
 
 
$
3,396
 
Net operating loss and tax credits (from acquisitions)
 
 
1,038
 
 
 
1,658
 
Director and employee benefits
 
 
2,392
 
 
 
2,276
 
Unrealized loss on AFS securities and fair value hedge
 
 
2,165
 
 
 
1,147
 
Accrued pension
 
 
801
 
 
 
852
 
Fair value adjustment on acquisitions
 
 
—
 
 
 
1,087
 
Other
 
 
670
 
 
 
1,083
 
Total assets
 
 
10,897
 
 
 
11,499
 
Liabilities
 
 
 
 
 
 
 
 
Depreciation
 
 
(1,850
)
 
 
(1,680
)
State tax
 
 
(137
)
 
 
(210
)
Federal Home Loan Bank stock dividends
 
 
(330
)
 
 
(339
)
Difference in basis of intangible assets
 
 
(2,919
)
 
 
(2,831
)
Fair value adjustment on acquisitions
 
 
(62
)
 
 
—
 
Other
 
 
(119
)
 
 
(125
)
Total liabilities
 
 
(5,417
)
 
 
(5,185
)
Valuation allowance
 
 
(1,038
)
 
 
(1,613
)
Net deferred tax asset
 
$
4,442
 
 
$
4,701
 
The Tax Cuts and Jobs Act (the “Act”) was enacted in December 2017. The Act reduced the U.S. federal corporate tax rate from 35 percent to 21 percent. As
 a result, federal deferred taxes were revalued as 
of
December 31,
2017 
to the effective rate of 
21
%.
As of December 31, 2018, the Company had approximately $13.9 million 
and $157,000 of state tax loss and state tax credit carryforwards, respectively, available to offset future franchise taxable 
income. The state loss carryforward begins to expire in 2031. Due to these losses being incurred by acquired institutions, prior to the acquisitions by Horizon, the annual losses which can be used are subject to an annual limitation. Management believes that the Company will be able to utilize the benefits recorded for the state loss carryforwards within the allotted time periods, except for the amount represented by the valuation allowance. The valuation allowance has been recorded for the possible inability to use a portion of the state net operating loss carryover.
 
Retained earnings of the Bank include approximately $12.8 million for which no deferred income tax liability has been recognized. This amount represents an allocation of previously acquired institutions income to bad debt deductions as of December 31, 1987 for tax purposes only. Reductions of amounts so allocated for purposes other than tax bad debt losses including redemption of bank stock or excess dividends, or loss of “bank” status would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amount for the Company was approximately $2.7 million at December 31, 2018.
The Company files income tax returns in the U.S. federal jurisdiction. With a few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2015.