Income Taxes

12 Months Ended

Dec. 31, 2018

NOTE 17 – INCOME TAXES

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

		2018			2017		2016
Current expense	$	6,123		$	9,451	$	8,642
Deferred expense (benefit)		(409	)		999		(1,157	)
TOTALS	$	5,714		$	10,450	$	7,485

Effective tax rates differ from federal statutory rate of 21% in 2018 and 35% in 2017 and 2016 that were applied to income before income taxes due to the following:

		2018		2017			2016
Statutory tax	$	8,039		$	11,606		$	9,815
Effect of nontaxable interest		(1,439	)		(2,054	)		(1,684	)
Bank owned life insurance, net		(182	)		(291	)		(283	)
Tax credits		24			(371	)		(367	)
Effect of nontaxable insurance premiums		(188	)		(348	)		(143	)
Stock compensation		(486	)		0			0
Impact of enactment of federal tax reform		0			1,793			0
Nondeductible acquisition costs		0			70			40
Other		(54	)		45			107
ACTUAL TAX	$	5,714		$	10,450		$	7,485

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

		2018			2017
Deferred tax assets:
Allowance for credit losses	$	2,837		$	2,525
Net unrealized loss on securities available for sale		1,040			0
Deferred and accrued compensation		1,065			981
Deferred loan fees and costs		580			517
Nonaccrual loan interest income		432			416
Other-than-temporary impairment		25			25
Restricted stock		431			647
AMT credit carryforward		0			64
Other		94			73
Gross deferred tax assets	$	6,504		$	5,248

Deferred tax liabilities:
Depreciation and amortization	$	(467	)	$	(448	)
Net unrealized gain on securities available for sale		0			(159	)
Federal Home Loan Bank dividends		(658	)		(656	)
Purchase accounting adjustments		(552	)		(744	)
Mortgage servicing rights		(308	)		(261	)
Prepaid expenses		(204	)		(277	)
Other		(12	)		(8	)
Gross deferred tax liabilities		(2,201	)		(2,553	)
NET DEFERRED TAX ASSET	$	4,303		$	2,695

No valuation allowance for deferred tax assets was recorded at December 31, 2018 and 2017.

At December 31, 2018 and December 31, 2017, 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 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 2015. The tax years 2015—2018 remain open to examination by the U.S. taxing authority.

In December of 2017, H.R.1, commonly known as the Tax Cuts and Jobs Act (the “Act”), was signed into law. The Act included several provisions that affected the Company’s federal income tax expense, which reduced the federal income tax rate to 21% effective January 1, 2018. As a result of the rate reduction, the Company was 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 income tax expense of $1.8 million in 2017.