NOTE 16 - INCOME TAXES

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

		2017		2016			2015
Current expense	$	9,451	$	8,642		$	3,046
Deferred expense (benefit)		618		(1,157	)		(547	)
TOTALS	$	10,069	$	7,485		$	2,499

Effective tax rates differ from federal statutory rate of 35% applied to income before income taxes due to the following:

		2017		2016			2015
Statutory tax	$	11,474		$	9,815		$	3,694
Effect of nontaxable interest		(2,054	)		(1,684	)		(1,403	)
Bank owned life insurance, net		(291	)		(283	)		(242	)
Tax credits		(371	)		(367	)		(236	)
Effect of nontaxable insurance premiums		(348	)		(143	)		0
Impact of enactment of federal tax reform		1,793			0			0
Nondeductible acquisition costs		70			40			401
Other		(204	)		107			285
ACTUAL TAX	$	10,069		$	7,485		$	2,499

Deferred tax assets (liabilities) are comprised of the following:

		2017			2016
Deferred tax assets:
Allowance for credit losses	$	2,525		$	3,621
Net unrealized loss on securities available for sale		0			1,522
Deferred and accrued compensation		981			1,922
Deferred loan fees and costs		517			729
Post-retirement benefits		0			25
Nonaccrual loan interest income		416			306
Other-than-temporary impairment		25			196
Restricted stock		647			509
AMT credit carryforward		64			205
Other		73			106
Gross deferred tax assets	$	5,248		$	9,141

Deferred tax liabilities:
Depreciation and amortization	$	(448	)	$	(740	)
Net unrealized gain on securities available for sale		(159	)		0
Federal Home Loan Bank dividends		(656	)		(1,093	)
Purchase accounting adjustments		(744	)		(1,559	)
Mortgage servicing rights		(261	)		(299	)
Prepaid expenses		(277	)		(271	)
Other		(8	)		(15	)
Gross deferred tax liabilities		(2,553	)		(3,977	)
NET DEFERRED TAX ASSET	$	2,695		$	5,164

No valuation allowance for deferred tax assets was recorded at December 31, 2017 and 2016.

At December 31, 2017 and December 31, 2016, the Company had no unrecognized tax benefits recorded. The Company does not expect the amount of unrecognized tax benefits to significantly change within the next twelve months.

The Company has approximately $64 thousand of alternative minimum tax credits that can be carried forward indefinitely.

The Company paid no penalties for the year ended December 31, 2017 or 2016. There were no amounts accrued for penalties or interest as of December 31, 2017 or 2016.

The Company is subject to U.S. federal income tax. The Company is no longer subject to examination by the federal taxing authority for years prior to 2014. The tax years 2014—2017 remain open to examination by the U.S. taxing authority.

On December 22, 2017, H.R.1, commonly known as the Tax Cuts and Jobs Act (the “Act”), was signed into law. The Act includes several provisions that will affect the Company’s federal income tax expense, including reducing the federal income tax rate to 21% effective January 1, 2018. As a result of the rate reduction, the Company is required to re-measure, through income tax expense in the period of enactment, the deferred tax assets and liabilities using the enacted rate at which these items are expected to be recovered or settled. The re-measurement of the Company’s net deferred tax asset resulted in additional 2017 income tax expense of $1.8 million.